Auto Enrolment

People simply aren’t saving enough for their retirement; by launching Auto Enrolment the Government hopes to increase the number of people saving, as most employees will be automatically enrolled into this new type of pension scheme.

What this means to you as an Employer:

• You will have to enrol all your employees (aged between 22 and the state pension age), earning more than £5,035 per annum, into either a ‘qualifying’ pension scheme or into one of the Government backed schemes known as National Employment Saving Trust (NEST).
• Employees younger than 22 or older than the state pension age can still ‘opt’ into the scheme.
• Employers will be required eventually to make a minimum contribution of 3% of pay, along with an Employee contribution of 4%, and 1% from the Government in the form of tax relief.

If you already offer a pension scheme or think you may wish to consider one we are happy to discuss the implications of the changes with you. When the scheme is fully in place you will have to make at least a 3% contribution for every employee over age 22 and for those under 22 who ‘opt in’. This may have a serious impact on your Company’s finances.

Reid Scott & Ross look after several company pension schemes from Stakeholder to Money Purchase and Final Salary Occupational Pension Schemes. We are supportive of any attempt to encourage people to save for their future, however, it is equally important for you to be able to make an informed choice about the type of pension scheme you wish to run.

We are delighted to offer free advice on Auto Enrolment and NESTs and bring you up to date with the latest information. Please contact us if you wish a short no-obligation appointment to answer any queries you may have and provide you with the up to date information.

Higher rate taxpayers have a greater financial incentive to contribute to a pension scheme than those in the target market described above but do not always do so. They will also have to save more to maintain their standard of living in retirement.

In order to benefit from the employer's contribution these employees can be enrolled in your employer's scheme, however a higher level of savings may be achieved in one of two ways:

• By setting up a separate "top up" pension arrangement to run alongside the employer's scheme
• By using the individual's own plan to meet their automatic enrolment duties

Both options will allow your senior employees to make a higher level of contributions and to build in more bespoke investment and benefit options.

The sophisticated investor

A subset of this group is the sophisticated investor who wants more investment choice than is likely to be available within an employer’s scheme. Those who want more choice may prefer to use their own plan alongside the scheme you effect for the staff.

This is particularly true of those who want to use their plan to invest in the business, for example by using a SIPP or a SSAS.

The serial employee

Individuals with more than one previous employer may well have more than one existing pension arrangement. This is unlikely to be efficient. Bringing these existing plans together could well reduce costs and will make it easier to measure progress against agreed targets over time. Reid Scott & Ross can advise your staff if they have more than one pension fund from previous employment.

Older clients

Automatic enrolment is designed to make it easier for people to save, and will hopefully increase the value of maturing pension plans in the long term. Combined with the results of the baby boom this should result in more, larger pension funds at retirement , which should in turn open up more choices.

Converting a pension fund to income is one of the most difficult, and in many cases irrevocable, decisions an individual will ever have to make, and should increase the need for good quality financial advice. This market is not just unaffected by automatic enrolment, it should be increased by it. Reid Scott & Ross can be on hand to give your employees retirement advice at this most important time in their life.

For more information speak to your Reid Scott & Ross adviser about the impact of Auto Enrolment on your business and identify how your employees will be affected.

Download Auto Enrolment PDF Fact Sheet