Employers UK wide are now required to automatically enrol all eligible employees into a workplace pension.
The workplace pensions law has now changed and every employer must comply. Auto enrolment legislation affects every employer in the UK with one or more employees. As an employer you will be required to ensure that all workers are offered a workplace pension and you will be required to pay at least the minimum contribution into a pension scheme of your choice on behalf of your employees.
The date workers will need to be enrolled will be staged and depends on the size of your organisation. Staging started in October 2012 and is being rolled out based on the largest to smallest PAYE schemes. For employers with fewer than 30 employees staging could be as late as 2015 giving you the opportunity to prepare and plan for how you will meet your obligations.
Prepare for workplace pension reform
Start planning for automatic enrolment with these eight simple steps:
- Know your staging date This will be based on the number of persons in your PAYE scheme as at 1st April 2012.The Pension Regulator will write to each employer 12 months before the date they are required to start enrolling workers into a workplace pension and again 3 months before to remind you.
- Nominate a point of contact This should be the individual within your business that will receive important updates from The Pensions Regulator.
- Assess your workforceEmployers will have to review their workforce; eligible workers who meet the criteria below will need to be automatically enrolled in a pension scheme:
- Aged between 22 and state pension age
- Working in the UK
- Earning above £9,440 (this figure is reviewed every year)
- Review Present Pension ArrangementsEmployers will have to select an automatic enrolment scheme which can be an existing scheme; you will need to check if it meets the criteria to qualify as an automatic enrolment scheme.If you do not have a pension scheme, there are a number of suitable providers including the National Employment Savings Trust (NEST), Established by the government to ensure that employers can access a pension scheme to help comply with automatic enrolment.
- Communicate changes to all workersEmployers must inform all workers (in writing) about the pension changes and how it affects them personally. This excludes those aged under 16, or over 75 but can include fixed-term contract workers.You can download letter templates from The Pensions Regulator website.
- Automatically enrol eligible job holdersAll eligible employees must be enrolled to the pension scheme from your staging date and new employees must be automatically enrolled within 3 months of joining the company.
- Employees who are outside the age limits (but under age 75), or earn less than the income tax threshold are also entitled to join and must be enrolled into the pension scheme if they ask to join.
- An employee can choose to opt-out within one month of being automatically enrolled into the scheme. In this case, any contributions paid into their pension pot will be refunded.
- Register with the Pensions Regulator and keep recordsEmployers must register with The Pensions Regulator and keep specified records about your qualifying scheme and the workers enrolled into it. You must register within 4 months of your staging date.You can register online.
- Contribute to your workers’ pensionsAfter your staging date, you must continue to contribute to your chosen pension scheme on behalf of your workers. The minimum contribution rates that an employer must pay into their workers’ pension scheme will be introduced gradually over a 6 year period (from 2012 to 2018). This is known as ‘phasing’. The minimum employer contribution will change from 1% to 3% over this time period.
Take a look at our short video on everything you need to know about auto enrolment.