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By now most large companies should be set for the pension reform, and already be contributing towards employees pensions. Under the pension act all those over the age of 22 and under the state pension age are eligible for pension providing they have been working for your company for over three months. The contribution is deducted from any sum between £5,564 and £42,475 per annum, providing they earn more than £8,105. Employees have the option to opt out of the compulsory pensions within 30 days of being enrolled, but their employer must re-enrol them every three years.
Pension reform dates
- 50,000 employees or more – Now
- 500 to 49,999 employees – 2013, month depending on size
- 50 to 499 employees – 2014 month depending on size
- New employers – 2016 month depending on date of first PAYE income
Companies will need to start preparing for the Pension Act because it comes into effect at different times depending on the size and the age of the company. From October 2012 to September 2017.
Employer pension contribution
In time all employers will have to amend their terms and conditions, documentation such as employee contracts will need updating to include employee and employer pension contributions. You must follow numerous steps to make sure your company is in line with the new legislation:
- You need to provide employees with a pension scheme if you do not already do so.
- If you do, you need to adjust it in reference to the Pension Act.
- You need to inform your employees of the change prior to the action.
- A percentage of each employees calculated earning will need to be deducted from their monthly wage.
- You will need to find the funds to meet a minimum level of employer and employee pension contributions as well as tax relief from the government.
- Employers should carry out frequent audits to stay on top of the contributions for each employee as they will rise from an initial two percent to an eventual eight percent of their qualifying earnings.
- If an employee is made redundant or leaves then they are entitled to all the employee and employer pension contributions to date.