New regulations mean that for the first time, from a specified date known as the staging date, employers are required by law to automatically enrol certain types of employee into a workplace pension and make a contribution to it.
This brings with it many new employer duties and associated challenges. Here are some key steps to preparing for Auto-enrolment:
Nominate a point of contact - someone who will manage / implement the scheme in your business.
Know your staging date and develop a plan of action.
BETWEEN NOW AND YOUR STAGING DATE
Assess your workforce so that you understand how many (if any) of your employees are affected. There are 3 different categories of workers to be considered:
: Aged between 22 and state pension age (SPA), working in UK, earning above the earnings trigger for auto-enrolment (currently £10,000). Members of this category of worker must be automatically enrolled into a qualifying pension scheme and you must make employer contributions.
: Aged 16-21 or SPA-74, working in UK, earning above the earnings trigger for auto-enrolment OR Aged 16-74, working in UK, earning above the Lower Earnings Limit (currently £5,824) but below the earnings trigger for auto-enrolment. Members of this category of worker have a right to opt in to a qualifying pension scheme. If they choose to do so you must make employer contributions.
: Aged 16-74, working in UK, earning below the Lower Earnings Limit (currently £5,824). Members of this category of worker have a right to join a qualifying pension scheme; however there is no requirement to make employer contributions.
Once completed, this initial assessment can be used to help you calculate the probable administrative impact and employer contribution costs to your business. These costs can then be factored into profit margins, business plans, budgets, etc.
Choose a qualifying pension scheme. You may have an existing scheme that you could use for auto-enrolment but you will need to check that it is suitable. If not you will need to put one in place. Further information on the minimum features required for a UK pension scheme to qualify can be found on The Pensions Regulator website. It is advisable to start the process of looking for the right pension solution for your business some 6 to 12 months in advance of your staging, as some pension providers are being reported to be unwilling to assist SME’s with qualifying pension schemes due to the anticipated high administrative burden involved. Grant & Co are delighted to be partnering with independent financial advisors Noble James Associates Ltd, who can help you choose and administer a qualifying pension scheme that is right for your employees and your business needs. Alternatively you might want to use the NEST (National Employment Savings Trust) scheme, which is open to all employers and was created as part of the Government’s pension reforms. As part of a delegate system Grant & Co are able to administer NEST on behalf of our clients, including setting up a NEST pension scheme, enrolling employees and managing contributions.
Communicate the changes. Employers are required by law to write to all workers (except those aged under 16, or 75 and over) explaining what automatic enrolment into a workplace pension means for them. There are different information requirements for each category of worker.
Postponement. Employers have the option of postponing their auto-enrolment duties in respect of all, or a selection of workers, by a period of up to 3 months from their staging date. Any postponement of duties must be communicated to all workers affected.
FROM YOUR STAGING DATE
Automatically enrol all ‘eligible jobholders’ who are not already a member of a qualifying pension scheme into your scheme.
Facilitate ‘opt outs’. Workers may ‘opt-out’ of this new kind of pension saving by obtaining an opt-out notice from the pension scheme into which they are enrolled. The opt-out period lasts for one month and any deductions made from the worker’s salary during this time must be refunded. After this opt-out period workers can still cease membership of the scheme in accordance with the normal rules of the scheme, with any refund of contributions being determined by those rules. The workplace pension reform includes safeguards that employers must adhere to to ensure jobholders are not penalised in any way for being a member of a workplace pension scheme and that recruitment practices are not affected.
Inform ‘non-eligible jobholders’ and ‘entitled workers’ that they can join / opt-in to your scheme.
Continually assess your workforce and enrol new employees on the date they join your employment and existing employees when they become old enough or earn enough to be enrolled for the first time. You will also need to re-enrol employees who opt- of pension saving, known as re-enrolment, every three years. As part of your plan of action you should consider whether your current administration / HR / payroll systems are able to handle this adequately.
Register with The Pensions Regulator and keep records. You will complete a compliance declaration with The Pensions Regulator within 4 months of your staging date and then every 3 years. This is a straightforward online process, completed via the Government Gateway. If you don’t have an existing Government Gateway User ID then you will need to register for one. Alternatively, Grant & Co are able to complete your declaration on your behalf. There will also be records you will be required to keep under law in relation to your workers and your pension scheme.
Contribute to your workers’ pensions. Except in the case of ‘entitled workers’, you will be required to make on-going employer contributions to your worker’s pension scheme. The minimum contribution rates, made up of employee and employer contributions, plus tax relief, will be introduced gradually under ‘phasing’.
||Minimum total contribution
|1 Oct 2012 to 30 Sept 2017
||2%, with a minimum 1% employer contribution
|1 Oct 2017 to 30 Sept 2018
||5%, with a minimum 2% employer contribution
|1 Oct 2018 onwards
||8%, with a minimum 3% employer contribution
The good news is that Grant & Co can help. Whether you need just a little assistance to meet your new duties, or a fully comprehensive service, our value for money solution can be tailored to meet your exact needs. We can:
Introduce you to our experienced payroll team who will ensure the smooth transfer of your payroll scheme to our systems
- Introduce you to our experienced payroll team who will ensure the smooth transfer of your payroll scheme to our systems
- Assist with choice & set up of a compliant pension scheme
- Assess your workforce
- Calculate your costs
- Handle statutory staff communications
- Enrol your staff into your chosen pension scheme
- Calculate & report pensions contributions
- Complete The Pensions Regulator declaration of compliance
- Manage your ongoing employer duties
If you would like further advice or information please do get in touch.
WE ARE HERE TO HELP
Telephone: 01242 223160