Pension Auto-Enrolment - Everything You Need To Know As An Employer
What is pension auto-enrolment?
Under the Pensions Act 2008, every employer in the UK including sole traders, partnerships and limited companies must put certain staff into a workplace pension scheme and contribute towards it. This is called 'auto-enrolment'. If you employ at least one person you are an employer and you have certain legal duties.
The Pensions Regulator is responsible for ensuring that all employers comply with workplace pension law. It's important to you understand what you'll need to do.
Which employees does pension auto-enrolment apply to?
The company needs to provide a workplace pension if any of its employees fall into the following categories;
- aged between 22 years old and the state pension age.
- earns more than £9,996 per year (£883 per month or £192 per week).
What are the key dates for pension auto-enrolment?
The two important dates to be aware of are;
- Duties Start Date - this is the date your first member of staff starts working for the company. Your legal duties begin on this date. If you put your staff into your pension scheme on this date, you need to start paying contributions into it from the next payday.
- Declaration of Compliance Deadline - The date by which you must tell the pensions regulator how you have met your legal duties for automatic enrolment. You must do this by completing an online form known as your declaration of compliance. The pensions regulator will write to you to tell you the deadline.
What are the steps to setting up pension auto-enrolment?
1. Choose a pension provider - the pension scheme should be set up for auto-enrolment, independently reviewed or regulated by the Financial Conduct Authority.
2. Work out which employees will need to be included in the pension scheme.
3. Write to all staff individually explaining how pension auto-enrolment applies to them - this must be done with six weeks of enrolment. The pensions regulator provides letter templates here - www.tpr.gov.uk/write-staff
4. Declare auto-enrolment compliance online with the pensions regulator - this must be completed within six months.
How much am I required to contribute to employee pensions as an employer?
Employers must contribute a minimum of 3% of an employees salary and employees must contribute a minimum of 5% of their salary. This is subject to review in future.
Employers and employees can contribute a higher percentage if they prefer.
What are my ongoing duties?
- Assess any new staff you take on to see if they meet the age and earnings criteria to be put into a pension scheme.
- Monitor the ages and earnings of your staff every time you pay them to see if they need to be put into a pension scheme.
- Pay at least the minimum contribution levels into their pension scheme.
- Process requests to join and leave the pension scheme.
- Keep accurate records of what you have done.
Information about re-enrolment.
Every three years after your duties start date you’ll need to assess staff not in your pension scheme, this includes certain staff that were previously automatically enrolled but have left the pension scheme. If they meet the criteria to be put back into your pension scheme, then you must do so. This is known as re-enrolment.
The pensions regulator will write to you nearer the time to explain what you need to do and by when.