What Is Automatic Enrolment?
Automatic Enrolment is a Government scheme that is changing the way workplace pensions operate in the United Kingdom. Through extensive research conducted by the Government, it was concluded that individuals were not saving enough towards their retirement and a state pension was not enough to support those who had not already put money aside.
Now the onus is on the employer. Every company in the UK has been issued a staging date -this is the date by when the new procedures must be implemented and integrated into normal day to day life for that business. It is the responsibility of that company is to enrol their eligible employees into qualifying pension schemes and financially contribute to it alongside the Government and the employee.
What Do I Need To Do?
The Pensions Regulator will begin the Automatic Enrolment process for your business by sending you a letter containing your staging date. You have until this date to get procedures in place and achieve full compliancy.
In order to meet the Pensions Regulator’s standards you must do the following:
- Assess the eligibility of your workforce
- Decide on a qualifying pension scheme
- Create an action plan
- Plan payments
- Educate your employees
- Set up and maintain records
It is advisable to seek help from a professional payroll team and/or financial advisor. They will both be able to guide and advise you on the different aspects of planning and ensure that you are fully compliant and set up with the most suitable scheme for your business in time for your staging date.
Which employees are eligible?
| Age (inclusive) to earnings |
16-21 |
22- State Pension Age |
State Pension Age To 75 |
| Over ‘earnings trigger’ for automatic enrolment (£10,000) |
Non eligible jobholder |
Eligible jobholder |
Non eligible jobholder |
| Between £5,772 and £10,000 |
Non-eligible jobholder |
||
| Under lower earnings threshold (£5,772) |
Entitled worker |
||
Choosing A Pension Scheme
Choosing a pension scheme may require you to meet and discuss your options with a financial advisor. This is advised although not required. You can opt to use the Government led scheme, NEST (National Employment Savings Trust) which has been designed to be available to all employers. Your company may already have a pension scheme however it must be compliant within automatic enrolment standards.
What are my responsibilities towards my workers?
As an employer it is your responsibility to carry out the following for your employees:
- Enrol Your Employees
- Contribute To Their Pension
- Maintain Their Records
Your minimum contribution levels change over time as the scheme matures, from the initial set up of your company’s pension scheme you will only have to contribute 1% of your employee’s monthly earnings, which will increase to 3% from October 2018.
Minimum contributions of “Banded Earnings”
|
Employer |
Employee |
Tax Relief |
|
| Oct 2012 – Sept 2017 |
1% |
0.8% |
0.2% |
| Oct 2017 – Sept 2018 |
2% |
2.4% |
0.6% |
| From Oct 2018 |
3% |
4% |
1% |
What If My Employees Don’t Want To Contribute?
Each of your eligible employees is perfectly entitled to opt-out of contributing to their pension. You are still required to enrol them; it is then their choice to opt-out. You are also required to re-enrol them every three years, if they still do not want to contribute they then have to opt-out each time.
As an employer you cannot advise your employees to opt-out, it is their choice. If you are caught doing this you can face a significant penalty.
When Is My Staging Date?
It depends. The staging dates are grouped depending on the amount of employees there are in your business. Each business’s staging date is different although it will be within a set period.
If your business was incorporated before April 2012, your staging date will fall into one of the following phases:
- Employers with 50-61 staff 01/08/14 to 01/04/15
- Employers with 30-49 staff 01/08/15 to 01/10/15
- Employers with fewer than 30 staff 01/11/15 to 01/04/17
Staging dates for employers who set up after 1 April 2012:
|
Date PAYE income first payable |
Staging date |
| Between 1 April 2012 and 31 March 2013 | 1 May 2017 |
| Between 1 April 2013 and 31 March 2014 | 1 July 2017 |
| Between 1 April 2014 and 31 March 2015 | 1 August 2017 |
| Between 1 April 2015 and December 2015 | 1 October 2017 |
| Between 1 January 2016 and 30 September 2016 | 1 November 2017 |
| Between 1 October 2016 and 30 June 2017 | 1 January 2018 |
| Between 1 July 2017 and 30 September 2017 | 1 February 2018 |
What Happens If I Miss My Staging Date?
Failure to be compliant in time for your staging date can amount to a significant penalty from the Pensions Regulator. The initial fine is £400, which is fixed and payable within a specific period. Further to this the Pensions Regulator can also issue an escalating penalty notice of £50 to £10 000 a day, depending on the number of employees you have.
Penalties are also issued in the case of failing to pay contributions due. This is a penalty of £5000 for individuals and up to £50,000 for organisations.
