Legislation which comes into force in October 2012 requires employers in Great Britain to automatically enrol “eligible job holders” into a pension scheme.

The good news for small and medium sized businesses, however, is that auto-enrolment will be phased in.  The larger businesses will have to commence auto-enrolment from October 2012 although medium sized employers staging dates have been revised to between 1^st April 2014 and 1^st April 2015 and small businesses staging dates have been revised to between 1^st June 2015 and 1^st April 2017.

Smaller businesses, meaning employers with fewer than 50 employees, were originally given a start date of April 2014 for auto-enrolment to commence.  However, the revised timetable will now see smaller businesses being given longer to implement the new legislation. Medium sized businesses are defined as employers with between 50 and 249 employees.

Small business lobby groups fought hard for additional time to prepare for the changes.

Despite hard lobbying, however, all businesses will remain subject to the new pension legislation.

From whatever date the employer duties apply, all "eligible job holders'" must automatically be enrolled in a qualifying pension scheme (employers can, however, impose a 3 month waiting period for new job holders).

If existing pension schemes (occupational or personal) meet requirements, existing schemes can apply.  If not, the employer must enrol job holders in NEST (National Employment Savings Trust).  This is a central Government scheme.

There are eligibility requirements – a job holder must earn a certain amount per year and be between the age of 22 and State Pension age.  The earnings criterion corresponds with the Income Tax personal allowance. Job holders include permanent and temporary employees as well as agency workers.

The proposed increase in the minimum rate of employer contributions form 1% to 2%, corresponding to earning bands, has also been delayed from 1^st October 2016 to 1^st October 2017.

Job holders will have the statutory right to opt out but cannot be “coerced” into doing so by their employer.

The Pensions Regulator will enforce employer compliance.  Larger employers could face penalties of £10,000 a day for failure to implement the legislation.  Where there is “wilful” failure to comply, criminal penalties could be imposed.