Auto Enrolment is the legislation by which all UK employers must provide a pension scheme for all their eligible employees to join and both employer and employee contribute.
The Pensions Act 2008 established new duties for employers to provide workers with access to a pension scheme that meets certain minimum standards. Some of your employees will need to be automatically enrolled, and some can ask to join.
What do you need to do?
There are many processes, as an employer, that you have to complete in order to fully comply with the Government legislation.
Firstly, you need to find out your company Staging Date, it can take a company up to 12 months prior to their Staging Date to plan for Auto Enrolment. The Staging Date is determind by the size of your company, the bigger your business the earlier your staging date.
Up to 40% of businesses have estimated the wrong Staging Date, make sure you aren’t one of them by clicking on the ‘Find out your Staging Date’ tab above.
Find out your staging date
Fill out this short form to receive your staging date by email.
Choosing a Pension Provider
We can’t legally advise which Pension Provider you should use, but we have highlighted below, a handful of the Pension Provider’s we work with:
Choosing a Pension Scheme
The amount of income that’s used to calculate how much goes into a member’s retirement pot is called ‘pensionable earnings’ or an ‘earnings basis scheme’. You
can choose from a number of different ways to define the earnings basis for your workers, as long as the final contribution amounts at least match the legal
minimum based on qualifying earnings.
Here are the earnings bases you can use:
Qualifying Earnings - are those that fall within a set band. For the 2013/14 tax year this band of earnings is anything over £5,668 and up to and including £41,450.
So an individual worker’s qualifying earnings are their earnings that fall into this band. Qualifying earnings include a worker’s salary, wages, overtime, bonuses and
commission, as well as statutory sick, maternity, paternity or adoption pay.
Tier 1 certification - this is based on earnings equal to or more than a worker’s basic pay. Basic pay is defined as a worker’s gross earnings, including holiday pay and
statutory benefits, but not including commission, bonuses, shift allowance, overtime, or any other similar allowance. You can decide whether to include any of these
other elements in this definition or earnings if you want to.
Tier 2 certification - this must be based on earnings at least equal to basic pay and must be at least 85% of total pay. This 85% rule applies to the total earnings of all
the workers you’re using Tier 2 certification for.
Tier 3 certification - this is earnings based on the worker’s total pay. Total pay includes everything paid to a worker in respect of their employment, including basic
pay, commission, bonuses, shift allowances and statutory sick, maternity, paternity, or adoption pay, with some very limited exceptions.
On staging, workers already members of a qualifying pension scheme must be provided with information about the scheme.
Non-eligible jobholders and entitled workers must be provided with information telling them about their right to opt-in or join a pension scheme.
For eligible jobholders being automatically enrolled (and non-eligible jobholders being enrolled after opting in), they must be provided with:
- Information about their enrolment
- What it means for them, including the contributions, and
- Their right to opt-out
Workers subject to a postponement need to be given key information such as, the length of the postponement period and their rights to opt-in or join.
Letters to be sent to employees
- Introduction Letter
- Letter for Eligible Jobholders
- Letter for Entitled Workers
- Letter for Non-Eligible Workers
- Postponement Letters for all workers except for existing pension members
- Postponement Letters for all workers
- Letters for workers currently on the scheme
- Opt-out Conrmation Letter
SGW Payroll can manage all the correspondence on behalf of your company, this ensures all your letters to employees are legally compliant.
As with real time PAYE you must keep records of automatic enrolment activities, this includes information sent to the Pension Provider and copies of any opt out requests. The records must be kept for a minimum of 6 years and 4 years for opt outs.
What records need to be kept?
- Jobholders and workers who become members
- Jobholders who opt out
- Personal pension scheme
- Active eligible members
- Pension scheme details
- Scheme where the employer is certifying that a quality or alternative requirement is satisfied
Declaration of Compliance
This must be completed when staff members are automatically enrolled. This conforms that legal duties have been completed. The declaration must be completed within 5
months of the company’s Staging Date, and 2 months after every re-enrolment date.
Auto Enrolment is an ongoing duty and needs to be checked every pay period to ensure compliance.
Non-compliance & Penalties
- The Pension Regulator aims to fully recover all penalties issued
- Civil action may be taken through the courts
- Employers who consistently fail to comply will be prosecuted
- Goods can be confiscated and a restrain on assets during criminal investigations