Sophie Warner - April 18th, 2016
All employers must comply with regulations set out by “The Pensions Regulator” by their “staging date”. The relevant staging date can be found by entering the PAYE reference into the pensions regulator website at http://www.thepensionsregulator.gov.uk/employers/staging-date.aspx
Some exemptions are available if you don’t have any “workers”. For example, if you are running a Limited Company where the only employees are directors, none of whom have a contract of employment, then you do not need to operate a pension scheme for those employees. However, you must apply for the exemption.
All employers will be required to make a “Declaration of compliance” to The Pensions Regulator within 5 months after your staging date. This is done by using your government gateway login via the Pensions Regulator website.
It is recommended that you start preparing for auto enrolment around 12 months before your staging date. We have found that by preparing early and doing things in stages, it doesn’t take too much time and does fit in with other payroll routines.
The timeline for actions required can be found in a helpful summary via the link below:
Choosing a scheme
There are limited providers operating pension schemes which comply with regulations. The scheme set up by the government which has no fees to operate for the employer is NEST. Visit http://www.nestpensions.org.uk/schemeweb/NestWeb/public/home/contents/homepage.html
You should ensure that your payroll software provider can produce reports compatible with the pension scheme software so that these can be directly submitted. This will be an important point to check as it may be time consuming if you have systems which are not compatible.
Assessment of workforce
Employees must be enrolled if they are aged between 22 and State Pension age AND earn in excess of £10000. Other employees MAY choose to be enrolled (OPT IN) and the employer MAY have to contribute for some of these employees. Further clarification can be found at: – http://www.nestpensions.org.uk/schemeweb/NestWeb/public/pensions/contents/auto-enrolment.html
Employees can choose to opt out of the pension scheme and any that do would be automatically re-enrolled every 3 years.
You should consider the costs involved in making pension contributions for all eligible jobholders well before your staging date so that your business can budget for them. Contributions will be due at the following rates:
|Employer minimum contribution||Employee minimum contribution|
|01/10/17 – 30/09/2018||2%||3%|
No deductions are due on earnings below the NI threshold, which is £5824 per annum (£112 per week) for 2016/17.
Once your staging date has arrived and your pension scheme is set up, you must notify all employees of their status and whether they have been enrolled by issuing a standard letter. At every pay date you must: –
- Assess your workforce to ensure all eligible workers are enrolled and that contributions are deducted.
- Deduct pension contributions from the employee and ensure that they are paid to the pension provider by the due date along with employer contributions.
- Keep a record of all actions in connection with pension requirements – including all pay date assessments, opt-ins and opt-outs by employees.
How we can help
We operate regular payroll services for many of our clients and as part of this service we would undertake the set-up and routine processing of their Auto Enrolment pension scheme.
If you have payroll systems in place but would like a little guidance through the process of Auto Enrolment, we would be happy to assist in this aspect.