Posted on 19/02/2016 by Tim Craig
As auto-enrolment represents the biggest change to pensions in many years you’ve probably heard about it by now. It’s something that every employer, no matter what size, needs to deal with.
And here’s why for those of you still in the dark. The law on Workplace Pensions has changed and every employer in the UK must put certain staff into a pension scheme and contribute towards it. In a phased process over the next three years, every employer will have to enrol eligible staff into a pension scheme. Failure to do so will result in fines from £50 to £10,000 per day depending on the size of the business.
And whilst automatic enrolment into workplace pensions has been rolling out across the UK since 2012, it is only now that 1.8 million small and micro employers need to act. So using various information sources, including The Pensions Regulator, we’ve put together this checklist to help you get things right with some useful links to further information.
1. When do I need to act?
Find out your ‘staging date’. The staging date is the date that the new law applies to your company and is determined by the size of your largest PAYE scheme. The easiest way to find out your staging date is by visiting The Pension Regulator’s website and make sure you have your PAYE reference to hand.
2. Review your workforce
Workers who need to be automatically enrolled, also known as ‘eligible jobholders’, will be:
- Aged between 22 and the state pension age (between April 2016 and November 2018, State Pension age for women will increase gradually to 65. Between December 2018 and October 2020 the State Pension age for men and women will increase gradually to 66).
- Working in the UK, or someone who usually does.
- Earning above £10,000 (this may change depending on the tax year).
3. Review your existing pension arrangements or select a qualifying scheme
If you have an existing pension arrangement then you need to check that it qualifies as an auto-enrolment scheme. Your current provider will be able to confirm this and if it doesn’t then you may be able to amend your policy. If you don’t have a scheme in place already then it’s best to speak with an independent financial advisor (IFA) or pensions advisor who can help you to find the best one for your business.
The Association of British Insurers and NEST are useful resources and there’s a qualifying scheme tool available on The Pensions Regulator website.
4. Communicate with your team
You’ll need to inform all your workers about the changes in writing (email is fine) and your communication must be specific to the individual. There is a range of letter templates to help with this.
5. Integrate your scheme with your payroll
To manage The Pensions Regulator’s requirements, you will need some form of auto-enrolment software and this needs to integrate with your payroll. Payroll companies have been working hard on ensuring that their applications can handle auto-enrolment requirements so they are well placed to advise you.
6. Register with The Pensions Regulator
Employers are required to inform The Pension Regulator about how they have fulfilled their auto-enrolment duties and this should be done online, shortly after your staging date. You’ll need to keep records about enrolled workers, their status within the scheme, the payment of contributions and the qualifying scheme itself.
You’ll also need to keep monitoring your entire workforce as circumstances may change so they become eligible and you may have to automatically enroll them.
After your staging date you must contribute to the pension scheme on behalf of your workers. Minimum contribution rates will be introduced gradually over a six year period (2012-2018) and this is known as ‘phasing’. The minimum employer contribution will change from 1% to 3% over this time period.
For further information please email us at firstname.lastname@example.org call us on 0843 504 4652.
The Pension Regulator - http://www.thepensionsregulator.gov.uk/employers/staging-date.aspx
The Association of British Insurers - https://www.abi.org.uk/Insurance-and-savings/Products/Pensions/Saving-into-a-pension/Automatic-enrolment/Providers
The Pension Regulator’s Qualifying Scheme Tool: http://www.thepensionsregulator.gov.uk/en/employers
The Pension Regulator’s Letter Templates: http://www.thepensionsregulator.gov.uk/autoenrolment-employee-communications