Pension Auto Enrolment

AUTOMATIC ENROLMENT

The law on workplace pensions has changed. Under the Pensions Act 2008, every employer with staff in the UK must automatically enrol those who meet certain criteria into a workplace pension scheme and contribute towards it.

All employers with UK-based staff will need to automatically enrol all eligible employees (between age 22 and state pension age, earning above a set minimum), into a workplace pension scheme.   Each employer has a set staging date by which to do this based on their payroll size.   There are compulsory pension contributions from both employers and employees.   These will be introduced gradually on a sliding scale

Date Employer minimum contribution Total minimum contribution
Employer’s staging date to 5 April 2018 1% 2%
6 April 2018 to 5 April 2019 2% 5%
6 April 2019 onwards 3% 8%

Everyone with a Registered Payroll Scheme will receive a letter from the Pensions Regulator about 13 months before their staging date and they will need to nominate your contact 11 months before the staging date. This is set in law and is the date your automatic enrolment duties come into effect.

This applies to all Business’s that have a payroll scheme even if the only employees are the Director(s).

Further information can also be found here at: The Pensions Regulator.

You will need to do notify the Pension Regulator who the nominated primary contact is and if required a secondary contact. This can be you, an alternate member of staff or anyone else such as us your Accountant/Payroll Provider. However, as the employer you remain legally responsible for complying with your duties and will continue to receive further correspondence from The Pensions Regulator.

If you would like us to complete the nomination on your behalf and nominate you as the primary contact and us as the secondary contact please contact Lianda Hollyman at lianda@isisaccountants.co.uk.

Pension contributions are usually expressed as a fixed sum or a percentage of earnings. If they’re expressed as a percentage you will need to confirm salaries with your pension provider / trustees regularly as necessary from time to time.

You also need to decide what elements of staff pay are used to calculate pension contributions, subject to any overriding legislative requirements, such as in relation to automatic enrolment. You may decide that only basic pay is pensionable but not bonus or overtime payments. Let your pension scheme know what you decide.

Automated payroll

If you process you own payroll you will need to calculate contributions and make the correct deductions from staff pay. You should also make sure your payroll system is compatible with the chosen pension scheme. If you’re unsure, check your payroll software.

If we prepare your payroll or you would like us to prepare your payroll, you can request that we provide a Managed Pension Auto-Enrolment Service and we will:

  • Assess each member of staff’s age and earnings.
  • Alert you to enrol new and existing staff.
  • Writing to staff about automatic enrolment
  • Automatically enrolling your staff
  • Opting out (‘Opting out’ is when a staff member decides to leave your pension scheme within a month of being enrolled. Staff you’ve automatically enrolled and those who have opted in can choose to opt out. You must not actively encourage your staff to opt out (which could be considered an ‘inducement’). Any decision to opt out must be taken freely by your staff member without influence from you.
  • Opting in and joining
  • Record-keeping
  • Submit the information to the pension provider

Nb. ISIS Accountants cannot give advice on pensions.

Safeguards

You must not encourage staff to opt out of a pension scheme (known as ‘inducement’).

There are safeguards in place to prevent you from:

  • unfairly treating your staff because they decide not to opt out
  • trying to advise staff to opt out
  • not recruiting someone because they don’t agree to opt out.

Setting up a pension scheme

If you don’t have a pension scheme, or don’t want to use an existing scheme, you’ll need to find a provider that can offer an automatic enrolment scheme. Make sure the scheme meets legal requirements and is good quality.

If you do have an existing scheme you will need to discuss whether it meets automatic enrolment requirements, whether your provider will fulfil your auto enrolment obligations (notifying The Pensions Regulator) and to review staff that are not currently in the existing scheme to ensure that you comply with the auto enrolment requirements.

Deciding which scheme to use for automatic enrolment will have a significant impact on the retirement income of your staff. A good quality pension scheme that is easy to manage, less likely to encounter administration issues, and a more secure home for pension savings.

When you’ve chosen a provider, you’ll need to work with them to get your scheme up and running.

There are a number of pension scheme providers including the National Employment Savings Trust (NEST). Established by the Government, NEST has a public service obligation to accept all employers that apply to join it.

Who can help you find a provider?

ISIS Accountants are able to direct you to an Independent Financial Advisers (IFA) who are professionals who offer independent advice on financial matters to their clients and recommend suitable financial products from the whole of the market. If you would like to us to forward your contact details to an IFA to help you find a provider please let us know.

You could speak to your own financial adviser about finding a provider.

There are private sector organisations that may be able to assist you with finding a financial adviser.

Link: The Pension Regulator Detailed Guidance

When finding a provider you need to ask them to demonstrate to you how their scheme meets the legal requirements and is good quality.

Questions to ask providers

Questions you should ask about the legal requirements include:

  • Does the scheme allow at least the minimum contribution levels?
  • Does the scheme allow staff to join it without providing any information?
  • Does the scheme allow staff to join it without making any choices, e.g. about where their money is invested?

Questions you should ask about the quality of the scheme include:

  • Do you ensure that the investments on offer are appropriate now and in the future?
  • Will you regularly review costs and charges to ensure they are still value for money?
  • Is compensation available if anything goes wrong?
  • Are members’ options clearly communicated as they approach retirement?

Link: Pension Key Areas

Further information can be found on The Pension Regulator website click here.

 

 

 

 

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