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Auto-enrolment definitions
Auto-enrolment definitions
We tell you what the technical terms mean here
A
- Auto-enrolment scheme
An auto-enrolment scheme must:
- Pay enough contributions to meet the minimum qualifying levels set by the government,
- Put in place all the administrative requirements to auto-enrol employees, and
- Have a default fund in which the contributions are automatically invested unless the employee chooses another fund or funds.
Related terms:
B
- Banded earnings
-
Contributions to a banded earnings pension scheme are based on a band of earnings (between £5,564 and £42,475, using the figures for the 2012/13 tax year). The lower and upper levels for this band will change from time to time. Banded earnings include overtime and bonuses, not just basic pay.
As an example, the contributions for someone earning £20,000 would be based on £14,436 (£20,000 minus £5,564).
Related terms:
Contributions threshold, Minimum earnings threshold, Pensionable earnings
C
- Contributions threshold
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Contributions to a banded earnings scheme are based on a band of earnings (between £5,564 and £42,475, using the figures for the 2012/13 tax year). The bottom end of the band is called the contributions threshold (£5,564 in the example above).
Related terms:
D
- Deferred period
You can choose to have a deferred period of up to three months for your auto-enrolment scheme. This would let you defer auto-enrolling staff between the date they first became eligible for auto-enrolment and the end of the deferred period.
Related terms:
E
F
G
H
I
J
K
L
M
- Minimum earnings threshold
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The minimum amount a person needs to earn to be auto-enrolled. This will be set by the government and may be the same as the income tax personal threshold (£8,105 in the 2012-13 tax year).
N
- NEST
NEST, the National Employment Savings Trust, is a new occupational pension scheme that will launch on 1 October 2012. It is open to any employer with UK employees but employers can choose another provider for their auto-enrolment scheme.
Related terms:
- Non-qualifying scheme
A scheme that doesn't meet the minimum contribution or benefit levels set by the government for qualifying schemes.
Related terms:
O
P
- Pensionable earnings
Contributions to a pensionable earnings scheme are based on earnings from the first £1. So for someone with pensionable earnings of £20,000 contributions would be based on £20,000. There is no upper earnings limit. Employers can decide whether to include overtime and bonuses.
Related terms:
- Pensions Regulator
The Pensions Regulator is responsible for making sure employers comply with the auto-enrolment regulations.
Q
- Qualifying scheme
A pension scheme that meets or exceeds the contribution or benefit levels set by the government.
Related terms:
R
S
- Salary sacrifice (also known as salary exchange)
Salary sacrifice is a way of making pension contributions that could allow both employers and employees to save money. This is how it works:
- An employee agrees to give up part of their salary or bonus in exchange for a pension contribution paid by their employer.
- The employer pays lower national insurance contributions (NICs) as a result of paying the employee a reduced salary.
- The employee also pays lower NICs and possibly less income tax.
- Employers are free to use their NIC saving how they wish. Some might use a portion of it to supplement their employees' pension plans.
- Employees can use their savings to boost their pension provision or increase their take home pay.
- Staging date
Your staging date is the latest date by which you have to have an auto-enrolment scheme in place for your employees.
Related terms:
T
U
V
W
X
Y
Z
WA04123 08/2012
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Find your staging date.
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Latest news
29th October 2012
Auto-enrolment staging dates - final position
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5th December 2011