The Pensions Act 2008 laid the foundations for a fundamental change to workplace pensions in the UK. Pension scheme membership will move from a voluntary to a semi compulsory arrangement. Under the reforms, which commenced in 2012 and which are being phased in depending on Company size, every employer is required to automatically enrol their ‘eligible employees’ into a pension scheme. The employee must make a contribution to the scheme and the employer also pays a contribution to the scheme on the employee’s behalf.

Statistically people are living longer. The ratio of workers to pensioners has declined and it’s estimated that as many as 7 million people are not saving for retirement. It is against this backdrop that the government has made the decision to ensure that employees are making a provision for their retirement.

You will be an ‘eligible’ employee if you meet all of the following criteria:

• Are not already in a qualifying workplace pension scheme (e.g. the AA Pension Scheme)
• Are aged 22 or over
• Are under the state pension age
• Are earning a salary of at least £10,000 p.a. (under current rules)
• Work or usually work in the UK

If you earn less than the minimum amount and/or fall outside of the age range you will not qualify for Auto-Enrolment but will be able to opt in to a qualifying workplace pension scheme if you wish. If you do so the Company may pay minimum contributions on the same basis as if you were an eligible employee.

The AA’s existing defined benefit scheme meets the qualifying pension scheme criteria as set by the Government. In addition, the AA has established a new defined contribution scheme, the AA Group Personal Pension Plan (AA GPPP). This is a qualifying scheme and it is this scheme that is used for all employees subject to Auto-Enrolment.

The Government has established a new pension scheme; the National Employment Savings Trust (NEST). This scheme is available for any employer who chooses to use it. It is specifically designed for the needs of employers who do not have any existing pension arrangements in which to enrol their employees. As the AA will provide its own qualifying pension plan for its employees, the Company will not be utilising the NEST facility.

All employees who are Auto-Enrolled will pay into the AA GPPP and the Company will also make a contribution into the scheme.

The Government has set minimum pension contributions for both employees and employers. To ease the burden of these contributions, the minimum payments are to be phased in as set out below. The AA will be using these ‘employer’ contribution levels.

Term	Minimum Employee Contribution	Minimum Employer Contribution
1 October 2012 – 5 April 2018	1%	1%
6 April 2018 – 5 April 2019	3%	2%
6 April 2019 onwards	5%	3%

After the initial contribution stage in April 2018 the employee will pay the majority of the total contribution although most employees will get a contribution from the Government in the form of tax relief.

The requirement to Auto-Enrol is being introduced over a period of four years starting in October 2012, depending on the size of the employer. The largest employers were subject to the requirements first, followed by medium and then small employers. The AA was required to implement Auto-Enrolment in July 2013.

No. Employers do not have to contribute if employees opt out of the scheme.

After a 3 month deferral period all eligible jobholders will be enrolled into the AA qualifying pension scheme and the appropriate deduction made from the employee’s salary (minimum 1%). The company will also make its own contribution to the pension scheme on behalf of the employee (1%).

If you decide you do not want to participate in Auto-Enrolment you will need to inform the pension provider (currently Legal & General) by completing an appropriate ‘opt out’ form within one month of receiving your letter confirming you have been Auto-Enrolled. If you do not opt out you will automatically continue to be a member of the AA GPPP.

If you want to stop paying into the AA GPPP after joining, you can do so by informing the Company that you wish to cease and opt out. If you opt out or you stop making payments the company is legally obliged to enrol you back into the pension plan at a later date. This is usually every three years.

Yes. The Company will keep employees updated regarding Auto-Enrolment. There are legal obligations regarding communication with employees that the company must comply with. The AA will comply with these requirements and ensure employees receive all necessary information to enable them to make the correct decision about Auto-Enrolment.

There are a number of organisations that can provide information regarding pensions:

www.direct.gov.uk/pensions – This is the Government’s website
www.pensionadvisoryservice.org.uk – This is an independent voluntary organisation which provides free information about pensions.
www.thepensionsregulator.gov.uk The Pensions Regulator is the UK regulator of work-based pension schemes.