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Pension schemes: Automatic enrolment

Many large retailers have already automatically enrolled their employees into qualifying pension schemes, however for many employees in the sector this will be their first experience of pension saving in the workplace.

With under 10% opt-out rates reported for retailers such as Co-op, Asda and John Lewis, James Dean, pensions partner at national law firm TLT outlines some key points that retailers need to be aware of regarding automatic enrolment.

Background and key points

  • All UK employers have a legal obligation to automatically enrol eligible jobholders into a qualifying pension scheme.
  • Employers who do not comply face escalating penalties of up to £10,000 per day for the most serious breaches.
  • For those employees who join, contributions which total 8% of earnings between an upper and lower limit must be paid in.
  • The new duties come into effect on an employer’s staging date, determined by the size of its largest Pay-As-You-Earn (PAYE) scheme.

Practical tips for retailers

  • If you haven’t already done so, check your staging date with the Pensions Regulator
  • Once you know your staging date, you need to work backwards to set up a project plan covering all the key issues.
  • Check your payroll software to ensure it can cope or needs to be enhanced.
  • Check who needs to be automatically enrolled and which category your employees fall into, for example, eligible or non-eligible jobholders or entitled workers. For retailers this will be more problematic than other sectors as retailers generally have a diverse range of workers.
  • Verify whether your existing pension scheme qualifies and decide whether you want to use it or a different arrangement, such as National Employment Savings Trust (NEST).
  • Communicate with your workforce. As an employer, you will need to write to your employees telling them whether they have been automatically enrolled and provide them with further information.
  • Enrol your employees into your qualifying scheme and register online with the Pensions Regulator.

To conclude

With fluctuating opt-out rates and only large to medium sized retailers having reached their staging dates, it is too early to judge whether the “inertia effect” of automatic-enrolment has ensured its success. The real test will be in the next 12 to 18 months.

For more information please contact James Dean, on 0117 917 8922 / Visit

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