To reduce reliance on low, state-sponsored benefits and to enable working-age individuals to save for a more comfortable retirement, the government of Guernsey has introduced legislation mandating the auto-enrollment of all employees into pension funds. The auto-enrollment pension scheme is not intended to replace existing pension plans but to enhance saving options for retirement.
Employees between the ages of 16 and the state pension age (currently 65 years and eight months) will be enrolled into the YIP plan or a qualified employer-sponsored pension scheme within three months of hire. Employees have the right to opt-out but will be automatically re-enrolled every three years. Additionally, employees will be allowed to opt-in after six months after their last opt-out.
Employers that do not sponsor a qualified pension plan (the exact criteria are not yet available) will be required to automatically enroll all eligible employees into the YIP scheme. The YIP scheme will be established as a private trust and operated by Sovereign Pension Services (CI) Limited, chosen by the state of Guernsey.
The auto-enrolment mandate will be phased in over a 15-month period beginning 1 October 2023, and a company’s staging date will be based on the number of employees as follows:
|Commencement date||Number of employees|
|1 October 2023||26 and more|
|1 January 2024||11 to 25|
|1 April 2024||6 to 10|
|1 October 2024||2 to 5|
|1 January 2025||1|
Employees not covered by the mandate — including those older than the state pension age and up to age 75, employees earning below or above the minimum and maximum social security ceiling, and self-employed or unemployed individuals — can voluntarily join the YIP scheme or a qualified employer’s scheme. Employers will not be required to make contributions on behalf of employees not covered by the mandate. At this time, it is unclear if employees will be allowed to voluntarily join the YIP scheme if they are already participating in a qualified, employer-sponsored pension scheme.
The scheme will provide for a phased increase to contribution rates for the employee and employer as follows:
|Commencement date: 1 October 2023||Year 1||Year 2||Year 3||Year 4||Year 5||Year 6||Year 7 (2030)|
Employers must review their payroll and administrative processes and account for the additional costs associated with the new automatic enrollment pension scheme. Employers should consider these changes in any current salary planning, pension plan redesign, or pension contract renewal. Employers should monitor future legislation finalizing the requirements and implementation timeframes.