If you’re worried about the new legislation that’s recently made it compulsory to set up a workplace pension scheme for your staff, and have been putting it off – stop worrying and take action now. It’s actually a reasonably straightforward process, but if you don’t take action soon you could find that you’re in receipt of a hefty fine.
If you employ even one member of staff, you’re now responsible for enrolling them, if they are eligible, onto a pension scheme, and contributing towards it, depending on their salary. The legislation has been in place since 2012 for larger firms, but since 2015 it applies to all employers, however small.
Although the law calls this ‘automatic enrolment’ it’s only automatic for your staff members, it’s not automatically done for you. As an employer, you’ll need to get organised and take the steps necessary to make sure that anyone employed by you is enrolled onto the scheme, if they are eligible.
If you’re already ahead of the game and have been paying into a pension scheme for your employees, you’ll now have to check that it’s suitable for the automatic enrolment scheme.
What do you need to do?
The first thing you need to do is find out your staging date. This is the date your pension duties come into force and it depends on how many employees you had on 1 April 2012. You can find this information out from the Pensions Regulator website.
Your next task is to assess your staff and work out who needs to be enrolled. This table shows you who has to be enrolled and who has the right to opt in.
|Monthly gross earnings||Age||Weekly gross earnings|
|From 16 to 21||From 22 to SPA*||From SPA to 74|
|£486 and below||Has a right to join a pension scheme 1||£112 and below|
|Over £486 up to £833||Has a right to opt in 2||Over £112 up to £192|
|Over £833||Has a right to opt in||Must be enrolled 3||Has a right to opt in||Over £192|
Figures correct as of 2015/2016. *SPA = state pension age
1 Has a right to join a pension scheme If they ask, the employer must provide a pension scheme for them, but the employer doesn’t have to pay contributions into a pension scheme.
2 Has a right to opt in If they ask to be put into a pension scheme, the employer must put them in a pension scheme that can be used for automatic enrolment and pay regular contributions.
3 Must be enrolled The employer must put these members of staff into a pension scheme that can be used for automatic enrolment and pay regular contributions. The employer doesn’t need to ask their permission. If a member of staff gives notice, or the employer gives them notice, to leave employment before the employer has completed this process, the employer has a choice whether to enrol them or not.
Make sure that all of your staff records are accurate so that you have the right information to start with; National Insurance numbers, dates of birth and salary details are all essential for working out contributions and eligibility.
Provide the Pensions Regulator with contact details for the person in charge of auto-enrolment for your business. This can be you, someone in your company, or your financial adviser/accountant.
If any of your staff members want to opt out of the scheme, they can do so, but you must give them the option to enrol and the onus is upon them to opt out of they choose to do so.
The Pensions Regulator should write to you and let you know when your staging date is; or you can work it out for yourself using the calculator tool on their website. Generally, the fewer employees you had in April 2012, the longer you have to set up your scheme, but it pays to be well prepared.
Choosing a Pension Scheme
Once you have all the information, you can find a suitable pension scheme, if you don’t already have one in place. You should do this at least six months before your staging date, and if you already have a pension scheme, ensure it’s eligible beforehand. You can check eligibility on the Pensions Regulator website:
Once you have a scheme set up, you should write to all your employees and let them know about auto-enrolment and what it means for them
How much will it cost?
To begin with, your contribution towards the scheme is 1 per cent, but this will rise over the next few years, and from October 2018 you can expect to be contributing a minimum of 3 per cent for every employee.
The exact amounts can be calculated with another tool on the Pensions Regulator website.
There are different types of pension schemes and providers available – look for a scheme run by a specialist provider and make sure that it’s compatible with any accounting/payroll software you’re using.
After the staging date
You’ll need to make sure that your records are kept updated to keep track of new staff members, salaries and contributions. You might want to invest in payroll software to help with this. Within five months of your staging date you must complete a declaration of compliance – don’t forget to do this or you could be fined.
Every three years you’ll have to go through the auto-enrolment process again, with a re-declaration of compliance – but if you’ve kept everything up to date this should be relatively easy to do.
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