What is the Impact of Automatic Enrolment?

Automatic Enrolment

What is the impact for both employers and employees?

The Office of National Statistics 2014 Annual Survey of Hours and Earnings provides us with evidence of the considerable impact of Automatic Enrolment within the pensions arena – for employees and employers. According to the survey findings:

The workplace pension scheme membership figures have increased to 59% in 2014, from 50% in 2013, driven by increases in membership of occupational defined contribution and group personal and group stakeholder schemes. The increase is likely to be driven by automatic enrolment.
Occupational defined benefit pensions schemes represented less than half (49%) of total workplace pension membership in 2014, for the first time since the analysis series began in 1997. Pension membership increased in all age groups in 2014 compared with 2013, with the largest increase (17 percentage points, to 53%) in the age group 22-29.
In the private sector, 33% of employees with workplace pensions made contributions of greater than zero but under 2% compared with 11% of employees in 2013. The increase is likely to be driven by automatic enrolment.

The proportion of employees in the private sector receiving employer contributions of greater than zero and under 4% was 43% in 2014, compared with 22% in 2013. The increase may be explained by new members who have been automatically enrolled into a workplace pension with lower initial employer contributions until the phasing of contributions is completed in 2018.

Following the Pensions Act of 2008, one of the key reforms was that from October 2012, all eligible employees were to be automatically enrolled into a qualifying workplace pension scheme. Automatic enrolment was introduced for all employees aged between 22 and the state pension age, who earn more than £8,105 per year (£10,000 from April 2014) and are not participating in a workplace pension scheme.

This article was originally published on 26/03/2015.  Taxation reliefs, levels and bases can change in the future and the content of the article refers to our understanding of taxation legislation at the date shown.  Tax is dependent on your own personal situation and circumstances and is subject to change based on UK legislation and taxation regime.

Sources: www.ons.gov.uk (Published Report – February 2015)