60 second guide: Auto-enrolment

Who will it affect? Workers who must be enrolled into a qualifying scheme are those who: - are not already in a workplace pension scheme - are aged between 22 and state pension age - learn more than £9,440 a year (in the 2013/14 tax year) - work in the UK. Auto enrolment is being phased in over a five-and-a-half year period from 1 October 2012. The size of the employer's PAYE scheme as at 1 April 2012 determines the point at which the duty will kick in – referred to as the 'staging date'. Larger employers will be affected before smaller employers. All eligible workers must be enrolled by 2018. Cost and opt outs Employers have to make a minimum contribution into each eligible employee's qualfying scheme. This contribution is being phased in: it starts at 1% of salary, rising to a minimum of 3%. Employees must also make minimum contributions. Workers will have a statutory right to opt out of a scheme, subject to certain time limits. However, even if an individual opts out, the employer will have to automatically re-enroll them every three years. It is unlawful for an employer to persuade people to opt out. Workers who don't qualify for auto-enrolment can opt in by giving notice to their employer – although they wouldn't be entitled to an employer contribution. Compliance Compliance will be policed by the Pensions Regulator. Employers in breach of the new requirements will face significant penalties: larger employers in flagrant breach could face penalties of up to £10,000 per day, or even criminal prosecution. There are many registration, communication and record-keeping obligations for employers. The Pensions Regulator has produced useful guidance for employers, including a timeline: for more, see www.thepensionsregulator.gov.uk.