In October 2012 the first employers will be required to enrol employees automatically into a “qualifying scheme” unless the employees actively opt out. The overall legislative structure of auto-enrolment is set out in the Pensions Act 2008. The Pensions Bill 2011(introduced into Parliament on 12 January 2011) makes a number of amendments to the automatic enrolment provisions endorsing the recommendations of the Government-commissioned review (published October 2010) of the automatic enrolment requirements.

The key aspects of the Bill include:  

  • A jobholder will only be eligible for auto-enrolment when he/she earns in excess of £7,475 per year (aligned with the income tax personal allowance for 2011-12);  
  • An optional waiting period of up to three months for the auto-enrolment process. The employer must provide the jobholder with a prescribed notice; and  
  • A simplified test for employers to self-certify that their defined contribution schemes meets the relevant quality threshold. An employer will need to satisfy any one of three tests based on a past year’s scheme data.

Given that the legislative framework is almost complete, employers should be taking steps to develop a plan to comply with automatic enrolment, if they have not already.