What does it mean for me as an employer?
Automatic enrolment is only ‘automatic’ for your staff – it is not automatic for you, their employer. Although it’s a simple concept it may be a time consuming and expensive exercise for many employers, both to set up and then administer on a long-term basis.
As an employer you will have to:
- assess your workforce to determine your duties to each member of your staff
- set up a qualifying (for auto enrolment) workplace pension scheme
- enrol those staff who qualify for auto enrolment into the scheme
- honour your duties to other members of staff
- submit a declaration of compliance
- make employer contributions to the scheme
- make deductions from your staff’s pay and pay this into the scheme
- administer the scheme on a long-term basis
- keep auditable records for six years
In fact, auto enrolment could bring your organisation up to fifty new ‘actions’ and many of these are long-term, ongoing responsibilities that will need your regular attention. There’s an eleven-point checklist setting out the key tasks on The Pensions Regulator’s website (The Pensions Regulator website: checklist) and you can download a list of the new actions by clicking here: Auto enrolment: 50 actions employers must take.
As an employer it’s essential that you know exactly what you will have to do and plan how you’re going to do it as implementing auto enrolment may take much longer than you think.
Every member of your staff, either full time or part time, who is not already a member of a workplace pension scheme, qualifies for auto enrolment if they normally work in the UK, are aged between 22 and State Pension age and earn more than £10,000 per year (in tax year 2019-2020). However, it’s not quite as simple as that – you may have staff who aren’t eligible for auto enrolment but now have the right to either ‘opt in’ under the same terms and conditions, and yet others who have the right to ‘join’ a pension scheme.
For more information about classifying your workforce, please see our separate information sheet: Auto enrolment: worker classification.
Set up a qualifying workplace pension scheme (‘QWPS’)
You’ll have to put in place a ‘qualifying workplace pension scheme’, ie: one that qualifies for auto enrolment. If your company already has a workplace pension scheme you must make sure that it can be used for auto enrolment and, if it can’t be used, you’ll need to either have it modified or find an alternative scheme to use as well as or, possibly, instead of your existing scheme.
Enrol your staff
You must write to your staff to tell them how the legislation applies to them and enrol those who qualify into the scheme. You may have to enrol other members of staff who don’t qualify for automatic enrolment but do have the right to opt in under the same terms and conditions and others who have the right to join a pension scheme but not necessarily the auto enrolment scheme. You’ll have to advise your workforce how auto enrolment affects them and explain the contributions they’ll have to make along with their options, for example, how they opt out of the scheme if they want to.
As an employer you have to contribute to your QWPS. During tax year 2019-2020 the total minimum contribution is 8% of the jobholder’s qualifying earnings and, as their employer, you are legally required to make a minimum contribution of 3%. The jobholder pays the remaining 5% (although tax relief is available).
The DWP (Department of Work and Pensions) set the minimum total and employer contributions at the start of the scheme and these increased year-on-year until April 2019. As for the future, a DWP report released on 25 January 2018, concluded that “Today’s report shows how far we have come and makes some sensible suggestions about how to evolve the system in future. But much of the original plan is still to be delivered, with contribution rates rising over the next two years. For firms who are facing rising costs across the board – and employees with other legitimate calls on their income – it is right to complete this first phase and let it bed in before making further changes. A timeline of the mid-2020s for new proposals would be sensible and enjoy business support.” For more info: www.autoenrolment.co.uk/news/dwp-review-auto-enrolment-success
|Auto enrolment: contribution levels|
|From||To||Total minimum*||Employer minimum*||Balance|
5 April 2018
|6 April 2018||5 April 2019||
|6 April 2019||
*Note: Note: only the total minimum and employer’s minimum rates are specified. Tax relief is available; the jobholder pays the balance.
For more information about contributions, please see our separate information sheet: Auto enrolment: contributions.
Administer the scheme on a long-term basis
Apart from making regular contributions to the scheme, you must monitor the ages and earnings of your staff as changes may make them eligible at a later date. You’ll need to keep auditable records about your staff and the scheme for up to six years. Every three years you’ll have to automatically re-enrol any member of staff who opted out of the scheme when it was introduced, causing them to stay in or opt out again.
Declaration of compliance
Within five months of your staging date you must submit a declaration of compliance to The Pensions Regulator, setting out what you’ve done and confirming that you’ve met your obligations.
How can One Financial Solutions help you?
One Financial Solutions is here to help you. We can help you plan and implement everything necessary to ensure you comply with the new legislation and fulfil your legal obligations.
If you already have a workplace pension scheme we’ll review it to make sure it can be used and will recommend any changes that may be needed. If you need a new scheme we’ll find one for you and, as a truly independent firm of financial advisers, we’ll make sure the scheme we recommend is selected from the entire market and is the one that is best for both you and your staff.
More than that, if you’d like us to administer the entire scheme for you, we can do that too.
So, if you’re looking for specific help about auto enrolment or just want advice on the subject, please call us on 020 3714 9565 or ask us to call you by sending an email to firstname.lastname@example.org.