What does it mean for employers?
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.
In fact, auto enrolment could bring an organization up to fifty new ‘actions’, many being long-term, ongoing responsibilities that will need regular, if not constant, attention.
It’s essential that you understand 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. There’s detailed guidance on The Pensions Regulator’s website at www.thepensionsregulator.gov.uk and you can download our list of possible key actions by clicking here: ‘Auto enrolment: 50 actions employers may need to take’, which provides a brief summary.
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
Assess your workforce – who qualifies?
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 (tax year 2022-23). 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 as those who do qualify, and 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 either to have it modified or find an alternative scheme to use as well as or, possibly, instead of your existing scheme.
Enrol those staff who qualify into your QWPS
On your ‘duties start date, you must enrol those members of your staff into the QWPS, and then write to them explaining why they’ve been enrolled, what it means to them and what their legal rights are. You’ll have to explain the contributions they’ll have to make along with their options, for example, how they can opt out of the scheme if they want to.
Honour your duties to other members of staff
The Pensions Act also gives other staff legal rights. You may have to enrol those members of staff who don’t qualify for automatic enrolment, but do have the right either to ‘opt in’, into your QWPS under the same terms and conditions as those who did qualify. You may also have other staff who now have the right to ‘join’ a pension scheme (but not necessarily the QWPS). Note: there’s a significant difference between ‘opting in’ and ‘joining’…
Declaration of compliance
Within five months of your duties start 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. This declaration will need to be repeated every three years as you automatically re-enrol your staff.
Make employer contributions
As an employer, you have to contribute to your QWPS. The Department of Work and Pensions (DWP) set ‘minimum total’ and ‘minimum employer contribution’ rates at the start of the scheme and these have increased on an annual basis. (However, in January 2018, a DWP report concluded that, ‘… a period of stability was needed before introducing any further rate changes and that contribution rates should be temporarily frozen.’) The DWP expects a minimum contribution of 8% of the jobholder’s qualifying earnings must be paid into the QWPS; employers must make a minimum contribution of 3%, with the balance (5%) being paid by the jobholder (although tax relief is available).
|Auto enrolment: contribution levels|
|From||To||Total minimum*||Employer minimum*||Jobholder|
|6 April 2023||5 April 2024||
*Note: only the total minimum and employer’s minimum rates are specified, the jobholder paying the balance. Tax relief is available.
For more information about contributions, please see our separate information sheet: Auto enrolment: contributions.
Make employee contributions
In addition to making your own, ‘employer’ contributions to the QWPS, you’ll also have to arrange the necessary deductions from your employees’ earnings and ensure these are paid into your QWPS.
Administer the scheme on a long-term basis
You must monitor the ages and earnings of your staff every time they are paid as changes in either may make staff eligible or non-eligible for auto enrolment which means you’ll have to manage this, and you’ll need to write to your staff giving them updates about the scheme and the value of their pension. Every three years you’ll have to automatically re-enrol any member of staff who may have chosen to ‘opt out’ of the scheme, causing them to make a decision as to whether they stay in or opt out again. You’ll also need to keep auditable records about your staff and the scheme for up to six years.
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.