All UK employers, regardless of their business size, must put eligible employees into a workplace pension scheme as part of the Pensions Act 2008. This ‘automatic enrolment’ was introduced to address the high number of British workers with very little savings for their retirement.
You’re usually an employer if you deduct tax and National Insurance contributions from an employee’s wages. This employer status means that you have to provide a workplace pension scheme for qualifying staff as soon as your first member of staff starts working for you, this known as your ‘duties start date’.
Which employees are classed as ‘eligible’?
You must enrol and make an employer’s contribution for all staff who:
- are aged between 22 and the State Pension age
- earn at least £10,000 a year
- normally work in the UK(this includes people who are based in the UK but travel overseas for work)
If at any time, staff become eligible because of a change in their age or earnings, you must put them into your pension scheme and write to them within 6 weeks of the day they meet the criteria.
If you’re employing staff for the first time it's important that you understand what to do and by when, so you can meet your automatic enrolment duties on time.
You must perform your full and ongoing duties below each time you pay your staff. You can however request your accountant performs these tasks on your behalf as part of a payroll service.
1. Monitor the ages and earnings of your employees
2. Manage requests to join or leave your pension scheme
3. Keep accurate and up to date records
As a first step, you must monitor the ages of your staff and how much you pay them. This is so that you can see whether they qualify for you to enrol them into a pension scheme – this also includes new starters. You must put eligible employees into a pension scheme and write to notify them of this within six weeks from the day they meet the age and income criteria.
Any employees who are aged between 22 and state pension age, earning over £10,000 per year (or £833 per month, or £192 per week) must be added into your pension scheme where you must both pay into it.
If you’re unsure of what the state pension age is, you can check using the State Pension Calculator here.
An employee can write to you asking to join your scheme if they are aged 16 to 74 and earn at least £520 a month or £120 per week. If you receive a request of this kind, you must put them into the pension scheme within a month of receiving their request. To find out how much you will need to pay in this instance, you should ask your pension scheme provider.
Employees can also request to leave your pension scheme after being put into one. If they choose to leave within a month of being put in, this is known as ‘opting out. If any of your employees opt out, you will need to stop taking money from their pay and arrange a full refund of what has been paid to date, this must be actioned within one month of their request. Most pension providers will manage the opting out process on your behalf, its’ worth speaking to your provider if you’re unsure of the process.
You must keep records of how you’ve met your legal duties, including:
- the names and addresses of those you've put into a pension scheme
- records that show when money was paid into the pension scheme
- any requests to join or leave your pension scheme
- your pension scheme reference or registry number
You must keep these records for six years except for requests to leave the pension scheme which must be kept for four years.
Once your pension scheme is set up and your eligible staff have been put into it, your legal duties aren’t over. You must continue with the payments due to the scheme every time you run payroll. Contributions paid into the scheme are monitored by The Pensions Regulator who can tell if payments due are not being made on your staff’s behalf into their automatic enrolment scheme. If you fail to comply with your ongoing legal duties, they will take action and any missed payments will also need to be backdated.
Do I have to match the employee contributions as an employer?
It’s a common misconception that employers must match the employee contribution. Currently employees must contribute 5% and employers 3%.
If employees left your pensions scheme, you will need to re-add them every three years if they still meet the criteria. This is known as re-enrolment. The Pensions Regulator will write to you in advance of your re-enrolment date to explain more.
Whether you have staff to put back into your scheme or not, you must complete a re-declaration of compliance to declare how you have met your duties. Re-enrolment and re-declaration are your legal duties, if you don't act you could face a fine.
What is the declaration of compliance?
The declaration of compliance is an online form that you must complete to inform The Pensions Regulator how you have met your legal duties for automatic enrolment and re-enrolment.
This employer's declaration is a legal duty. It must be completed within five months of the start of your legal duties otherwise you could be fined, however, you are able to authorise and appoint someone to do this on their behalf.
You can complete the declaration of compliance online here.
Pension Auto Enrolment
Pension reform is about more than just setting up a pension. Once the scheme has been set up you have a number of ongoing legal duties.
These can be complex and time consuming. At Blue Rocket, we can manage all of this on your behalf, reducing your paperwork and ensuring that your company fulfils its duties. Find out more.
If you would like to find out more about how we can support your business growth by managing Auto-Enrolment on your behalf call us today on 01322 555442.
We look forward to hearing from you soon.