Auto enrolment is a requirement for employers to provide workers with a workplace pension scheme over the next few years.
When to set up your Auto Enrolment Pension Scheme
When your business must start doing this (known as a ‘staging date’) depends on how many people you have on your payroll.
All employers will be contacted 18 months before their staging date by The Pensions Regulator. Generally larger employers will be first with small and micro employers usually in 2016- 2018. All employers should have staged their auto enrolment by April 2019.
Your automatic enrolment staging date was set on 1st April 2012. You can check your staging date with The Pensions Regulator. You will need your PAYE reference. If you don’t pay your staff through a PAYE scheme, your staging date will be 1st April 2017.
You must set up a workplace pension scheme before your staging date, if you don’t already offer one.
Highland Payroll Services can help you in the set up of your auto enrolment. This involves the selection of the provider, writing to the employees to provide notification of the forthcoming staging date, enrolling employees and dealing with any employee opt outs. Details of our prices can be found here.
If you already have a workplace pension scheme, you can check if you can use it here.
Workers who qualify for a workplace pension
You must enrol all workers who:
- are aged between 22 and the State Pension age
- earn at least £10,000 a year
- work in the UK
You don’t have to enrol a worker if you’ve good reason to believe they have one of the lifetime allowance protections.
Minimum pension contributions
Minimum contributions are based on what’s known as ‘qualifying earnings’. Qualifying earnings are a section of a worker’s pay. For the 2017/18 tax year this is everything over £5,876 and up to £45,000. The qualifying earnings band is reviewed by the government each year.
Workers who earn at least as much as the lower threshold each year are entitled to a minimum contribution into their retirement pot.
The minimum contribution rate itself only applies to a worker’s qualifying earnings.
Employees will contribute a minimum 1% of their qualifying earnings from staging date until April 2018, 3% until April 2019 and 5% thereafter.
Employers will contribute a minimum 1% from the staging date until April 2018, 2% until April 2019 and 3% thereafter.
|Date||Employees contribution||Employers Contribution|
|Staging to April 2018||1%||1%|
|April 2018 to April 2019||3%||2%|
|April 2019 onwards||5%||3%|
If you run your own pension scheme you must keep its assets separate from your business assets. You must make an employer’s contribution to the pension scheme for those workers.
You must pay any pension contributions you take from your employees into your staff pension scheme by the date you’ve agreed with your provider. This date must be no later than the 22nd (19th if you pay by cheque) of the following month.
You may be fined by The Pensions Regulator if you pay late or don’t pay the minimum contribution for each member of staff. The fines for failing to comply start at £400. There is also a penalty of between £50 and £10,000 per day for failing to comply with a statutory notice, depending on the numbers of staff.
Once your have auto enrolled your staff, they have 30 days to opt out if they wish. During that period they can obtain a full refund of their contributions.
If an employee opts out, they should be re-enrolled in 3 years time.
Employers will need to keep records for 6 years. Payroll must be monitored on each pay run to check if any employees now qualify for auto enrolment through their earnings or age. The pension provider will require a monthly report of contributions.
Highland Payroll Services can assist in providing all of your auto enrolment payroll support. Details of our pricing can be found here.