Auto enrolment the Work Place Pension

Hopefully by now you will have seen on TV or heard on the radio the adverts about work place pensions. ‘I’m in’ are words used. Preparing your business to meet the new auto enrolment rules is something that cannot be ignored.

During 2012 we wrote to all of our clients explaining that there were new rules coming into force from 5th April, 2013, which meant that every single time an employee was paid they needed to tell HMRC about it. This was ‘real time information’ but compared to auto enrolment rules this was just a small ripple in a sea of waves just about to hit the shores of every business.

Consider this; in addition to telling HMRC how much you have paid your employees and how much tax you have deducted from them each time you pay them, under auto enrolment rules you will also have to decide whether or not to deduct a pension contribution from their gross earnings and / or make a pension contribution on their behalf. You do this by placing each employee into a category of three which determines their eligibility. Sounds simple, right?

The three categories for eligibility are eligible, not eligible and entitled. Each category is determined on three factors which have to be considered on the date they are paid which are as follows.

1) the employees age
2) their earnings
3) whether they are defined as a worker

To go into a bit more detail, if they are aged between 22 and the current state pension age of 74, earn more than the current amount for a normal persons personal allowance of £9,440 and are defined as a worker i.e. has a contract of employment / contract to perform work services in the UK, then they are considered eligible and must be auto enrolled.

If they are aged between 16 and the state pension age, earn less than the current personal allowance but more than lower earnings limit for national insurance which is £5,668 and are defined as a worker they are considered not eligible.

If they are aged between 16 and 22 but earn more than the personal allowance they are also not eligible.

You do not need to auto enrol either of them but you must write to them explaining that they are not eligible to be auto enrolled. The employee is entitled to opt into the scheme and you as the employer must contribute to their pension as well.

If they are aged between 16 and the state pension age and earn less than the lower earnings limit for national insurance and are defined as a worker they are considered to be entitled employees. They are not entitled to a lot though. They are not entitled to be auto enrolled but they can opt in to the scheme and pay contributions themselves. You as the employer do not have to contribute.

Auto enrolled means that they must be enrolled into the pension scheme that either the company or the government has provided. The amount of pension contributions will be phased in but the aim is to get all employers contributing 8% of employee’s earnings to a pension. 5% will be deducted from the employee’s gross pay but 3% will be contributed by you the employer.

CONFUSED?

You probably are and the purpose of this article is to make you aware that auto enrolment is coming and doing nothing is not an option. The pension’s regulator will be issuing fines of up to £10,000 per day for non-compliance followed by criminal prosecution. Each employer will have a staging date and this is the date that you must operate auto enrolment from.

Please find further information on our website Services – Auto Enrolment

You can find out your staging date by contacting ISIS Wealth Management on 0845 345 7785 and at the same time our team will be happy to discuss what the next steps are to prepare for this.

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