Automatic enrolment has changed the face of the workplace pension dramatically and as an employer, you need to be aware of how this will affect you – not just now, but as auto enrolment contributions change in 2018. Here are the answers to some of the questions we frequently encounter from clients:
What is Auto Enrolment?
Under the Pensions Act 2008, every employer in the UK must put certain staff into a workplace pension and contribute towards it. This is called ‘automatic enrolment’ and is regulated by the Pensions Regulator.
How will I know what I’ll need to do?
On the date your duties start (known as your Staging Date) you must assess your staff to see if they meet the age and earnings criteria to be put into a pension scheme for automatic enrolment. Any staff meeting the following criteria must be automatically enrolled into your pension scheme and you must both pay into it:
- aged between 22 up to State Pension Age
- and earn over £10,000 per year, or £833 per month or, £192 per week
What you need to do will depend on whether you have anyone who needs to be put into a pension scheme or not. More detail can be found here.
What is a Declaration of Compliance?
It’s not enough to set up a scheme and automatically enrol qualifying staff. Your auto enrolment duties are not complete until you have submitted your ‘Declaration of Compliance’ via the Government Gateway, which is a legal duty on every employer. If it is not completed within five months of the start of you legal duties you could be fined. You are, however, able to authorise someone to do this on their behalf, like your accountant or pension provider.
What is Re-Enrolment?
Once is not enough. Every three years you must put certain staff back into a pension scheme; this is called ‘re-enrolment’ and is designed to ensure every eligible employee has the opportunity to participate in your scheme.
Your re-enrolment duties must be carried out approximately three years after your automatic enrolment staging date. Your duties will vary depending on whether you identify that you have staff to re-enrol, or whether you have no staff to re-enrol. Either way, you will need to complete a re-declaration of compliance to tell the Pensions Regulator how you have met your duties.
You can find more information at the Pensions Regulator’s website.
What are the Auto Enrolment Contribution Changes 2018?
As the new workplace pension is phased in across the country, Auto Enrolment contribution changes kick in from April 2018. The table below explains:
|Date||Employer minimum contribution||Total minimum contribution|
|Employer’s staging date to 05/04/18||1%||2% (including 1% staff contribution)|
|06/04/18 — 05/04/19||2%||5% (including 3% staff contribution)|
|06/04/19 onwards||3%||8% (including 5% staff contribution)|
When do I have to pay contributions?
You need to pay your contributions to your staff pension scheme on time. This includes calculating and deducting contributions from your staff’s salaries. You must agree the due dates for paying contributions to the scheme with your trustee or provider.
However the law requires that when you deduct contributions from your staff’s pay you must pay these to your staff pension scheme no later than the 22nd day (19th if you pay by cheque) of the next month.
What records do I need to keep?
You must keep information and records about what contributions you pay to your pension scheme for six years (in most cases). This will help you ensure the correct contributions are paid and provide evidence if there’s a dispute.
Records you should keep include:
- staff gross earnings
- staff and employer pension scheme contributions due to be paid (and if different the actual amounts paid)
You need to keep information on contributions and membership up to date and communicate any changes to your pension scheme provider or trustees.
As part of your normal day-to-day administration arrangements it’s good practice to provide the following ‘payment information’ to your scheme:
- any changes to a member’s earnings or contribution entitlement
- details of members leaving or joining the scheme
Your pension scheme provider or trustees need this payment information to meet their duties such as monitoring contributions and reporting material payment failures to the regulator.
Are there any exemptions?
There are very few exemptions to Auto Enrolment:
- Directors without an employment contract
If a director does not have an employment contract, they cannot be a worker and are therefore always exempt from automatic enrolment. This means that an organisation with one or more directors who do not have contracts of employment is not an employer if it does not have any staff other than the director(s). The company will have no automatic enrolment duties and does not need to complete a declaration of compliance. In this case they should let the Pensions Regulator know that they’re not an employer. If the organisation does have other staff, it has duties in respect of those other staff and is an employer. If none of the other staff meet the age and earnings criteria for automatic enrolment, the company still has to complete a declaration of compliance.
- With Employment Contracts
Where a company has multiple directors and no other staff – and at least two of the directors have employment contracts – all the directors with employment contracts will be workers and subject to the automatic enrolment duties – and all those directors without employment contracts will not be.
For more details about Auto Enrolment Pensions, call our Payroll Team on 01733 865265 or click here.