The law on workplace pensions has now changed and every employer must comply with automatic enrolment. If employers fail to comply with their required duties enforcement action may be taken and issue a notice and/or a penalty.
The Government, in an effort to encourage more people to save for their retirement, has introduced a requirement for employers to automatically enrol most of their workforce into a pension scheme.
Otherwise referred to as auto-enrolment or AE, automatic enrolment will usually require both the employer and the employee to pay contributions into the scheme.
Does auto-enrolment apply to you?
If you are an employer with employees in the UK then yes.
When do you have to do it?
Your start date, which is known as your staging date, depends on the number of employees that were on your PAYE Scheme as at 1 April 2012. The Pensions Regulator will write to alert you twelve months and three months before you are due to start but you can also check you date by visiting their website and use the ‘Find out your staging date’ tool.
Below are the suggested staging dates ranges for employers with a PAYE Scheme of 250 or less employees.
PAYE scheme size Date
There is an option to postpone automatic enrolment for up to three months from your staging date. Further information can be found on Pension Regulator’s postponement webpage.
Who should be in a pension scheme?
The basic criteria are that you must automatically enrol all employees that are:
Where certain employees don’t meet the above criteria there is still the option for them to opt-in and you must pay a contribution but there is another group where contributions from you will not be required. For further information refer to Knowing your Workforce.
What else do you need to do?
Each employee should be written to individually telling them how they’ve personally been affected by automatic enrolment. The information may vary depending on their rights and the duties you have for them.
The regulator must also be provided certain information on how you’ve complied with your duties. Find out more about reporting and regulatory duties.
Where do you start?
After finding your staging date you will be able to make your plan.
What costs are involved?
Your compulsory employer contributions are the main costs associated with the pension scheme. You’ll have to pay a minimum employer contribution for everyone you automatically enrol and anyone who opts-in.
The minimum amount is being phased in, starting at 1% and rising to 3% of staff’s qualifying earnings – for more information go to contributions and funding.
Whilst other costs will vary depending on your provider and the scheme you choose. You can use the Pensions Regulator’s calculator to work out your minimum employer contribution for an employee.
You must provide contact details for the most senior individual in your business, e.g. CEO/Managing Director, who will be the primary contact. A secondary contact, e.g. HR Manager/Pension Manager, may also be nominated.
Automatic enrolment registration
Registration is the legal requirement to submit information to the regulator about how you’ve complied with your employer duties. You can do this by providing details to the Pensions Regulator online. If you don’t do it in time, you could be fined. Automatic enrolment registration is a secure, online service accessed through the Government Gateway – Start Registration Now.