Pensions – Auto Enrolment

The law on workplace pensions has changed...

What is Automatic Enrolment?

The law on workplace pensions has changed. Every employer with at least one member of staff now has new duties, including enrolling those who are eligible into a workplace pension scheme and contributing towards it.

This is called ‘automatic enrolment’ because it is automatic for staff – they don’t have to do anything to be enrolled into a pension scheme, but it is not automatic for employers.

Automatic Enrolment has been introduced to provide employees the opportunity to save for their future. The State Pension will no longer provide an adequate income in retirement.

It is important to understand your duties as an employer and when you need to take action.

Staging Date

An employer's staging date is determined by the number of people in the largest PAYE scheme that they use, based on the data from HM Revenue and Customs held on 1 April 2012. An employer’s staging date is set in law and is the date their automatic enrolment duties apply to them. You must be prepared for this date. Check your staging date now.

You can also decide to bring your staging date forward to align it with other business practices, such as the start of your financial year.

If you are a new employer your staging date will be between1 May 2017 to 01 February 2018.

Who to enrol?

Employers can carry out a pre-assessment to find out who may be automatically enrolled at their staging date.

On the employers staging date a full assessment needs to be carried out of all staff and all eligible workers have to be enrolled in to a qualifying pension scheme.

These eligible workers will have been assessed on qualifying earnings over the current earnings trigger of £10,000 per annum. They will be aged between 22 and State Pension Age and are workers who are considered ordinarily working in the UK. They must not be already contributing to a qualifying pension scheme.

After the staging date the worker (including those on variable pay, flexible pay, irregular hours, etc) should be enrolled the first time they earn over the automatic enrolment threshold of £192 a week or £833 per month if paid monthly.

Opting in, Opting out and Joining a scheme

It's against the law to try and persuade staff to opt out of (or leave) a pension scheme.

On the assessment date there may be some workers who will be eligible to opt in to the pension scheme and employers must communicate this to these staff to inform them of how to proceed.

There may also be workers who are entitled to join the pension scheme but who are not eligible for the employer’s pension contributions. Employers must communicate this to these workers and how inform them how to join.

Choosing a Pension Scheme

There are a number of different types of pension schemes available and different types of providers offering these schemes. The type of scheme most likely to be available to employers is a scheme run by a large, specialist provider that is designed to be used by many different employers.

Employers will need to find a scheme for them and their staff that will work with their payroll process or software they’re using. It’s advisable that employers allow plenty of time to make the right choice. Find more information http://www.thepensionsregulator.gov.uk/press/pn15-31.aspx.

Checking an existing scheme

An employer with an existing pension scheme may want to use it for automatic enrolment. This scheme will need to meet certain criteria, which could involve changing the scheme rules or terms and conditions.

Employers need to check with the pension scheme provider to see whether it can be used for automatic enrolment. If the scheme is not suitable a new scheme will need to be chosen that meets the requirements for automatic enrolment.

Postponement

Employers may use postponement on their staging date to delay the automatic enrolment assessment for some or all of their staff for up to three months. For example, if an employer knows a staff member will be leaving within three months of their staging date, your client may apply postponement to that individual. This means the employer won’t need to assess this staff member to identify what duties they have until the last day of the postponement period, at which point they must enrol any staff members who are eligible.

If an employer is using postponement and a member of staff requests to be enrolled during the postponement period, they must be put into a pension scheme.

Ongoing responsibilities

Once staff are active members of a pension scheme, there are ongoing responsibilities for the employer, such as ensuring contributions are paid on time and that any notices relating to staff opting in and joining or opting out are processed and accurate records maintained.

Require more information?

Get in touch to find out how we can guide you through the process from planning to implementation and beyond.