Pensions

The date you need to start Auto Enrolment can be found on www.tpr.gov.uk/staging

Employers can choose to bring forward staging date provided the Regulator is informed but cannot choose a later date

We suggest that you choose your own Pension Provider. They have to be authorized by the government. Examples are NEST, NOW, Friendly Pensions, Scottish Life, Scottish widows etc

A brief overview of what employers have to do

  1. Automatically enroll certain workers into a pension scheme
  2. Make contributions on their workers behalf
  3. Register with The Pension Regulator
  4. Provide workers with certain information about the changes and how they will affect them
  5. Managing Opt Outs

 

You need to identify which workers need to be automatically enrolled. These are called ‘eligible jobholders’

An eligible jobholder is

Aged between 22 and state pension age

Working or ordinarily working in the UK

Earning above a certain amount proposed to be £9440 (will change each year)

All employers will have to register with the regulator who have one or more employee’s

The rules of the scheme must require the employer to pay an overall minimum contribution of at least 8% of the worker’s qualifying earnings, of which at least 3% of this contribution must be from the employer. In most cases, Government tax relief will account for 1% of the total 8%. At present it is 1% for employee and 1% for employer as a minimum. By 2017 it will be 4% and 3%

Employers who already have a pension scheme can confirm that it is suitable for automatic enrolment by a process called ‘certification’.

Workers who have been automatically enrolled have the right to opt out of the employer’s pension scheme. There is an opt out period of 1 month, where any deductions made from their salary will be refunded. Equally, any contributions the employer has made must be refunded to the employer by the pension scheme. The worker can choose to cease membership at any time, although they may not be entitled to a cash refund of contributions after the end of the 1-month opt-out period. To opt out, workers must give notice via a document called an ‘opt-out notice’ to the employer. These notices will be available from the pension scheme provider.

Some workers are entitled to ‘opt in’ but there is no requirement on the employer to make employer contributions in respect of these workers although the employer must set the deduction of the worker’s contributions from pay

An employer must be able to keep track of the ages & earnings of everyone who works for them at all times.

They will also have to keep records about their workers and the pension scheme used to comply with their duties

If an individual is a Director of a company and the company has no other employees, that individual is not a worker by virtue of any office that they hold or contract of employment under which they work. This also includes the Director’s wife

However, if the company takes a second worker, besides the Director’s wife, and both the director and employee work under a contract of employment the both will be workers for the purposes of the employer duties.

Non-Eligible Jobholders

These workers are not eligible for automatic enrolment, but can choose to opt in to a pension scheme. These include workers who either:

  1. are aged between 16 and 74
  2. are working or ordinarily work in the UK under their contract
  3. have qualifying earnings payable by the employer between LEL and but below the earnings trigger (£9440) for automatic enrolment

 

OR

 

  1. are aged between 16 and 21, or state pension age and 74
  2. are working or ordinarily work in the UK under their contract
  3. have qualifying earnings payable by the employer above the earnings trigger for automatic enrolment(£9440)

 

Jobholders

Jobholders are workers who

  1. are aged between 16 and 74
  2. are working or ordinarily work in the UK under their contracts
  3. have qualifying earnings payable by the employer LEL

 

Entitled Workers

These are entitled to join a ‘pension scheme’

  1. are aged between 16 and 74
  2. are working or ordinarily work in the UK under their contract
  3. do not have qualifying earnings payable by the employer under LEL

All employers with at least one worker, regardless of age or earnings must:

  1. Register with the Pensions Regulator
  2. Adhere to safeguards

Part of the automatic enrolment process requires the employer to provide the eligible jobholder with information telling them

  1. They have been, will be, automatically enrolled and what this means for them
  2. Their right to opt out and their right to opt back in

If an employee opts out the employer has to automatically re enroll them every three years if they are still an eligible jobholder working for that employer

If an eligible jobholder is already an active member of a qualifying scheme on their automatic enrolment date, the employer does not have to take any further action, other than to provide them with information about the scheme of which they are a member

If a non eligible jobholder chooses to opt in to a pension scheme, they must do so by giving the employer an ‘opt-in notice’ The employer will have to pay employer contributions to the scheme

Entitled workers do not need to be automatically enrolled. If the entitled worker chooses to join a pension scheme they must do so by giving the employer a ‘joining notice’. The employer must then arrange membership of a scheme for them. The employer will have to deduct contributions on behalf of the entitled worker and pay these in to the scheme. However the employer does not have to pay in the scheme themselves, unless they choose to do so.

You can defer (postponement) paying Pensions as long as procedures are adhered to (up to three months). You have to notify the employee within one month that you are deferring Pensions.