By Callum Beausire, Business Development & Marketing Associate at Concept Group Limited.

This is due to affect employers and their employees in 2022 although the effects of the COVID-19 pandemic may well delay the date.  The main take-away is that it will be mandatory to offer a form of qualifying pension scheme to all staff.

How will it work?

Once enrolled an employee can then decide to opt out, but the employer still has a legal duty to re-enrol their employees every three years (if the employee has opted out) and the employee is able to opt out again if they so wish.

For employees that do not opt out, which one would expect to be most as they will benefit from the employer contributions, the requirements will be that the employee contributes 1% of earnings in the first year of enrolment, which will then increase to 6.5% over a 7 year period.  The employer contributions will start at 1% and increase to 3.5% over a 7 year period. Together the employer and employee contribution rate will be minimum 2% of earnings in the first year, rising to 10% after 7 years. Minimum rates can be changed for employer and employee providing that the joint employer and employee rate is not less than the minimum in any year.

What is an Eligible Employee?

An eligible employee is any employee that is resident in Guernsey and paying Social Security contributions.  All eligible employees would need to be automatically enrolled into a qualifying scheme by their employer and the eligible employee has the option to opt out of the scheme if they so wish.

What should employers consider?

It is important for the employers to carefully consider what is the most suitable route to take in order to meet the new auto-enrolment obligations.  Considerations such as costs, ease of use, investments, green and sustainable investments, the number of employees, staff turnover and remuneration packages will all factor into which route is the most suitable to take.  Options for employers are:

• Establish their own qualifying scheme with an alternative provider;
• Use an existing pension scheme that they may have;
• Enrol employees into the default States Secondary Pension Scheme.

Concept Group Limited is a long standing, locally owned and locally run Guernsey based pension provider and has vast experience in operating employer sponsored pension schemes.  If you or your company is looking for more information about employer sponsored pension schemes, please get in touch by emailing us at pensionmadeeasy@cgl.gg or calling 01481 723550.