Auto Enrolment - Pensions

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The Pensions Act 2008 introduced new duties for all UK employers. If you own a business that employs one worker or more you’ll need to:

• Set up a workplace pension scheme that meets the new rules
• Automatically enrol all eligible workers
• Pay contributions into the retirement pots (pensions) of eligible workers
• Enrol other workers if they ask to join the scheme.

The employer must automatically enrol all employees into a pension scheme and make contributions to pension if all the following apply:

A workers classification criteria is:

• You have a contract or other arrangement to do work or services personally for a reward
• The reward is for money or a benefit in kind, e.g. the promise of a contract or future work
• You only have a limited right to send someone else to do the work (subcontract)
• You must turn up for work even if you don’t want to
• Your employer must have work for them to do as long as the contract or arrangement lasts
• You are not doing the work as part of your own limited company in an arrangement where the ‘employer’ is a in fact a customer or client
• ‘Qualifying earnings’ are usually the amount you earn before tax between £5,824 and £43,000 (2016-17) a year
• Qualifying earnings are usually the amount you earn before tax between £5,824 and £43,000 (2016-17) a year.

Automatic enrolment duties don’t apply when a company or individual are not considered an employer.

You won’t have any duties if you meet one of the following criteria:

• You’re a sole director company, with no other staff
• Your company has a many directors, none of whom has an employment contract, with no other staff
• Your company has many directors, only one of whom has an employment contract, with no other staff
• Your company has ceased trading
• Your company has gone into liquidation
• Your company has been dissolved
• You no longer employ people in your home (cleaners, nannies, personal care assistants, etc)

Auto-enrolment is being phased in over several years, starting with the largest employers and eventually taking in people who employ just one person.

Your staging date is the deadline by which you’ll need to have a scheme in place and be ready to enrol workers and start making contributions to their pension pots.

Please note we are not Pension Advisors therefore we cannot give you advise on what may be the best pension scheme for your business. We strongly advise you seek independent advice on the pension scheme that will suit your business and employees first. Once you have selected your pension scheme, we can then help get this set up on your payroll scheme.

You can find out your staging date using the Pension Regulator website tool by clicking here

 Employer Duties/ Impact  

• Legal duty to write to all your staff individually to explain how auto enrolment applies to them 
• Must pay a minimum percentage of your ‘qualifying earnings’ into your workplace pension scheme   
• Reduced Profit due to contributions   
• Deductible expense   
• Employee benefit increased   
• Give information to the pensions regulator about how you have met your auto enrolment duties every three years   
• Submit employee data every pay period to pay their contributions to the Pension Regulator   
• Monitor employee’s ages and earnings to see if any one needs to be auto-enrolled
• Employers can postpone automatic enrollment for up to three months.
• Employers must re-enroll eligible jobholders at least every three years if the employee has opted out.

     Employee  Duties/Impact   

• Has the right to Opt Out or In (this decision must not be influenced in any way by the employer)
• Employees are automatically enrolled if they earn over £10,000 a year and are aged between 22 and State Pension age
• Joining a workplace pension scheme means that their take-home income will be reduced   
• They’re entitled to tax credits or an increase in the amount of tax credits they get (although they may not get this until the next tax year) 
• They’re entitled to an income-related benefit or an increase in the amount of benefit they get   
• Reduce the amount of student loan repayments they need to make
• Employees aged 16 to 21 or 6 to 74 can choose to opt in to a qualifying pension scheme.
• Directors without an employment contract are exempt from automatic enrollment.
• If the employee has opted out, they are automatically re-enrolled every 3 years and will need to opt out again if they still wish not to make pension contributions.