On 27 October, the auto-enrolment review conducted for the Department for Work and Pensions (DWP): Making automatic enrolment work (the Review) was published and presented to Parliament. The Government has confirmed that it will proceed with auto-enrolment on the basis of the Review’s recommendations.

Auto-enrolment: the basics

Broadly, auto-enrolment is the term used for the upcoming obligation on employers to enrol their eligible jobholders (broadly, those aged between 22 and state pension age) into either the National Employment Savings Trust (NEST) or their own qualifying scheme. These obligations are set to be phased in, with the effect that the largest employers will become subject to the regime in October 2012, with the smallest employers becoming subject to the regime for the first time in October 2016.

The auto-enrolment legislation will oblige employers to contribute in respect of their eligible jobholders who do not opt out of the regime. The contribution structure is expected to entail employer contributions, ultimately (following a phasingin period), at the level of 3% of the jobholder’s qualifying earnings. Employees will also be required to contribute.

New developments

The Review’s key recommendations, which will now be adopted, are as follows:

  • The earnings threshold at which an individual is automatically enrolled will be aligned with the personal allowance for income tax (£7,475 for 2011). The Review also recommended that the threshold at which pension contributions become payable is aligned with the National Insurance primary threshold. Workers will be able to opt in if they earn between the thresholds
  •  Employers can wait for a period of up to three months before auto-enrolling a worker into its arrangements or NEST
  •  The procedure by which a defined contribution scheme meets the qualifying scheme requirements will be simplified
  •  A six month window will operate in order to give employers flexibility around the date on which they re-enrol employees

Overall, the Review contains many helpful easements and introduces greater flexibility for employers. However, employers should now turn their attention to the steps required in order to ensure compliance with the new regime.