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.
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."
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