You will no doubt have read in the Press and seen on the TV news about Workplace Pensions and Auto-enrolment. This change in law will see every employer in the UK required to help more of their workers save for retirement. It will involve new duties including the auto-enrolment of eligible employees into a qualifying pension scheme and paying a minimum contribution into that scheme. The changes, which for larger employers began in 2012, are being phased in over a number of years, with each employer being allocated a ‘staging date’ from when their duties will begin. Your staging date is can be found out here: http://www.thepensionsregulator.gov.uk/employers/tools/staging-date.aspx . There 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:
- Eligible jobholders: Aged between 22 and state pension age (SPA), working in UK, earning above the earnings trigger for auto- enrolment (currently £9440). Members of this category of worker must be automatically enrolled into a qualifying pension scheme and you must make employer contributions.
- Non-eligible jobholders: 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 (£5668 for 13/14) 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.
- Entitled workers: Aged 16-74, working in UK, earning below the Lower Earnings Limit (£5668 for 13/14). 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.
- 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, or you may need to set up a new one. Further information on the minimum features required for a UK pension scheme to qualify can be found on The Pensions Regulator’s website. We are delighted to be partnering with independent financial advisors Noble James Associates Ltd who can help you choose and administer a 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. It is advisable to start the process of looking for the right pensions solution for your business at least 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.
- 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.
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 pensions 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 or dissuaded from joining one 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, broadly 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 need to register with The Pensions Regulator within 4 months of your staging date. This will be 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. 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 will be introduced gradually under ‘phasing’. The minimum contributions are currently a total contribution of 2% (made up of employee and employer contributions, plus tax relief) with at least 1% employer contribution, which will apply from your staging date until 30 September 2017. The contribution rates are then set to rise to a total contribution of 5% with at least 2% employer contribution from 1 October 2017 to 30 September 2018, then to 8% with a 3% minimum employer contribution from 1 October 2018.
We will be offering a complete Auto-enrolment service to our payroll clients, which will include workforce assessment and communication, making compliance simple and hassle free.
If you would like further advice or information please do get in touch. Tel: 01242 223160 or email firstname.lastname@example.org.
We’re here to help.