Small business employees warned to prepare for auto-enrolment

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Employees of small businesses are being warned to prepare for the start of pensions auto-enrolment, when their employers will begin deducting pensions contributions from their salary automatically.

From 1 March, you will be entitled to a workplace pension if you work for a company with fewer than 58 employees. And if you work for a smaller company with fewer than 30 staff, your company will need to auto enrol you from 1 June 2015.

This will affect more than 46,000 companies, which will have to begin providing their employees with a workplace pension this year, according to NOW: Pensions.

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This workplace pensions initiative aims to get a larger proportion of the population saving for retirement, and you will be entitled to auto-enrolment if you are between the age of 22 and State Pension Age (65) and earn more than £10,000 a year.

The minimum your employer will contribute is 1% of your qualifying earnings, rising to 3% over time. You will also have to contribute a minimum of 1% of your qualifying earnings, eventually increasing to 5%.

Before 30 September 2017, your employer's minimum contribution will be 1% and you will also have to pay 1%. From 1 October 2017 to 30 September 2018, your employer's minimum contribution will be 2% and you will have to pay 3%. From 1 October 2018 onwards, your employer's minimum contribution will be 3% and the total minimum you will have to pay into your workplace pension will be 5%.

The good news for employees is that your company could pay more than the minimum requirement. According to research by NOW: Pensions, nearly one in five small- and medium-sized companies say they plan to contribute more than the legislative minimum when they introduce auto-enrolment.

More than half of those planning to pay more believe doing so will help with the recruitment and retention of employees.

Companies are legally obliged to carry out auto-enrolment and will face fines if they don't comply. At the end of January 2015, The Pensions Regulator issued 166 businesses with fixed penalties of £400 for non-compliance.

Morten Nilsson, chief executive of NOW: Pensions said: "Approaching auto-enrolment can feel daunting and there are a lot of things to consider, particularly for firms that have never set up a pension scheme before. But a little planning can go a long way and taking a thorough approach will certainly pay dividends."

Find out everything you need to know about the new pension rules and how to plan ahead for the retirement you deserve with our new magazine, How to Retire in Style. The magazine is available to buy now from all leading newsagents, or can be ordered online at

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