Since 1 October 2012 workplace pension schemes have to be put in place by the largest employers in the UK.

Staging dates

Since our last issue the staging dates for employers with less than 250 employees as at 1 April 2012 have been amended. Following industry pressure and accounting for the current economic climate, the Government has taken the decision to amend the staging dates for these employers to those identified in the following table, although at this point they are still indicative and under further consultation.

Employers do not have to wait until their staging date to opt into the new legislation; they can implement qualifying workplace pension schemes (QWPS) now if they so wish.

Categorising the workforce

It is important for employers to understand how the legislation defines different categories of workers. They need to understand the complexities involved in determining their workforce in order to identify for whom they will have to pay pension contributions.

Workers are defined as those who work under a contract of employment (an employee) or have a contract to perform work or services personally and are not undertaking the work as part of their own business. Workers are then subdivided into 'eligible jobholders', 'non-eligible jobholders' and 'entitled workers'.

Eligible jobholders

Eligible jobholders are those workers aged between 22 and state pension age (SPA), working in the UK and earning above the current earnings trigger for automatic enrolment of £8,105 in the 2012/13 tax year. These individuals must be automatically enrolled in to a QWPS and employers will need to pay pension contributions for them.

Non-eligible jobholders

Non-eligible jobholders are those workers aged between 16 and 22 or SPA and 74, working in the UK and earning above £8,105, or those workers aged between 16 and 74, working in the UK and earning above £5,564 (the lower earnings level for qualifying earnings in the 2012/13 tax year) but below £8,105.

These individuals have the right to opt in to a QWPS. If they do employers will need to deduct their personal contributions from them and make pension contributions on their behalf.

Entitled workers

Entitled workers are those workers aged between 16 and 74, working in the UK and earning below £5,564. These individuals have the right to join a QWPS and employers will need to deduct their personal contributions from them although they will not need to make contributions on their behalf.

For each category of worker mentioned, different reporting and communication requirements will have to be implemented. In addition, during an employee's lifetime they may move between one definition of worker and another, so this will have to be closely monitored. As and when a worker moves into another category, the employer will be required to issue the relevant communication to that individual. A large part of the legislation relates to record keeping so keeping track of the workforce and into which category they fall at any point in time will be imperative.

Multi-tiered solutions

We believe that many employers will look to implement a multi-tiered pension solution, which may incorporate the National Employment Savings Trust (NEST) or a competitor as well as their existing pension providers.

NEST was introduced under the auto-enrolment legislation as a default option for those employers not wishing to offer employees anything more that the most basic of pension arrangements.

However, as there are currently restrictions in place within NEST, including its inability to accept transfers in or out and the imposition of a maximum contribution limit, other options may be preferable.

The People's Pension from B&CE, and the NOW Pension Scheme, supported by ATP, the providers of the Danish National Pension, are potentially viable alternatives.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.