Practice Advice
Auto-Enrolment Pensions
Find out how Auto Enrolment works and what you need to do to comply. Also check out our calculator to see how much you and your employees have to contribute.
Find out how Auto Enrolment works and what you need to do to comply. Also check out our calculator to see how much you and your employees have to contribute.
Automatic enrolment, or auto-enrolment, is a government initiative that requires employers to put qualifying staff into a workplace pension scheme and ensure mandatory contributions are made.
It was first introduced for the largest employers from October 2012, before being gradually extended to all employers by 1 February 2018.
The idea was to increase pension participation among employees – and it’s certainly made a difference, having brought more than 10 million people into workplace pension schemes as of February 2019.
If your business employs staff who earn more than £10,000 a year and are between the ages of 22 and state pension age, they qualify for auto-enrolment.
This means you’re required by law to enrol them into a workplace pension scheme and make contributions at a minimum rate. Your employee will also need to contribute towards the scheme.
Any businesses that fail to comply with these rules could risk receiving a £400 fixed penalty from The Pensions Regulator, or escalating daily fines from £50 up to £10,000.
If you’re employing staff for the first time, your auto-enrolment duties will begin on the day your first employee starts work.
You’ll need to choose a pension scheme that’s set up for auto-enrolment, enrol qualifying staff in it, write to those members of staff to explain how auto-enrolment applies to them, and send a declaration of compliance form to The Pensions Regulator.
You then need to make contributions that meet a minimum rate, as a percentage of the employee’s qualifying earnings. In 2019/20, these are their annual earnings that fall between £6,136 and £50,000.
Your auto-enrolment duties don’t end with setting up a scheme.
There are other ongoing responsibilities to consider, including checking the ages and earnings of your staff to see whether or not they qualify, dealing with requests to leave or join the pension scheme, and keeping records.
You’re also required to re-enrol eligible workers who are not part of a scheme every three years, and re-declare your compliance to The Pensions Regulator at the same time.
The following minimum contribution rates apply as of 1 April 2019:
Use our calculator to work out how much you’ll need to pay towards an employee’s pension per year.
If you are thinking about employing staff or know that you need to comply with Auto Enrolment then ask us about our fixed price package.
We can handle all compliance and management of your payroll saving you the time to focus on what really matters.
Most workers in the UK are going to be automatically enrolled into a workplace pension scheme by their employer. From the date they’re automatically enrolled they’ll have a month to choose not to join, or ‘opt out’. If they do nothing they’ll be enrolled in the scheme. They’ll make contributions to their retirement pot from their pay for as long as they’re employed or until they take their money out.
Workers and employers can both contribute to build a retirement pot that’s invested on behalf of the worker. Workers who earn over a certain amount are entitled to a minimum contribution into their pot when they’re paid.
Our table highlights what the different parties must contribute to auto-enrolment pensions.
It is an employer’s legal obligation to issue a statement of main terms within 2 months of an employee commencing employment – employers without contracts need to get them in place now. Statement of main terms needs to include the pension details. Policies need to include mention of pensions, rollout and communication process, including opt-out procedures.
You are able to delay a new employee going into the scheme during a three month probationary period. Remember, that if you do this you must have documented it clearly. Note that whatever the length of the probation period, workers should be enrolled after three months.
If your payroll is simply for Directors and you all chose to opt out you are able to communicate with The Pensions Regulator and advise them immediately. This is normally accepted by them in the form of an email but you will require the reference number on your Pension Regulator letter. It does also mean that you will not have to source a Pension Provider.
Regardless of the size of your business and who gets paid, if you have a PAYE scheme in place you will have a Pension Staging date. It is as simple as that. Even if it is simply a payroll for Directors only - it still applies and you still need to do something about it. You will receive, or already have, a letter from the Pensions Regulator.
Regardless of the size of your business and who gets paid, if you have a PAYE scheme in place you will have a Pension Staging date. It is as simple as that. Even if it is simply a payroll for Directors only - it still applies and you still need to do something about it. You will receive, or already have, a letter from the Pensions Regulator.
Do not ignore it as there are no acceptable excuses - You will be fined heavily and could even face prosecution!
Identify a Pension provider as soon as possible. And remember that a lot of the pension companies are overwhelmed and are not accepting smaller companies into their schemes. You may have to choose some of the “capture all” pension providers like, among others, Simply Pensions, Now Pensions, Nest, Peoples Pensions, etc. Make sure you shop around for the best deals for your employees and get independent advice if need be.If you have employees, you must check your workforce status. Gather together all their details like name, date of birth, hours, salary, etc. Make sure all your employees records are up to date.
Identify your employee’s eligibility, it is based on age and earnings – and beware. Eligibility can change at each pay period as age changes and earnings can too!
The VAT return is calculated from the digital records maintained in the functional compatible software, and a business will need to confirm the return is correct before sending it to HMRC.
Our table highlights what the different parties must contribute to auto-enrolment pensions.
Although the Making Tax Digital (MTD) regime has suffered several setbacks and delays, MTD for VAT remains on course to take effect from its planned implementation date of 1 April 2019.
Under the scheme, VAT-registered businesses are required to maintain digital records,complete the VAT return from the digital records and send it electronically to HMRC.
It is an employer’s legal obligation to issue a statement of main terms within 2 months of an employee commencing employment – employers without contracts need to get them in place now. Statement of main terms needs to include the pension details. Policies need to include mention of pensions, rollout and communication process, including opt-out procedures.
Most workers in the UK are going to be automatically enrolled into a workplace pension scheme by their employer. From the date they’re automatically enrolled they’ll have a month to choose not to join, or ‘opt out’. If they do nothing they’ll be enrolled in the scheme. They’ll make contributions to their retirement pot from their pay for as long as they’re employed or until they take their money out.Workers and employers can both contribute into NEST to build a retirement pot that’s invested on behalf of the worker. Workers who earn over a certain amount are entitled to a minimum contribution into their pot when they’re paid.
You are able to delay a new employee going into the scheme during a three month probationary period. Remember, that if you do this you must have documented it clearly. Note that whatever the length of the probation period, workers should be enrolled after three months.
If your payroll is simply for Directors and you all chose to opt out you are able to communicate with The Pensions Regulator and advise them immediately. This is normally accepted by them in the form of an email but you will require the reference number on your Pension Regulator letter. It does also mean that you will not have to source a Pension Provider.
