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We’ve compiled a list of questions that we’re commonly asked by our clients about automatic enrolment, and answered them below.
When do I have to start complying?
In April 2012 all employers were allocated a staging date based on the size of their workforce (the number of individuals in their PAYE scheme as at 1 April 2012). Your staging date signals when your automatic enrolment duties commence.
By your staging date you should have set up your:
If you don’t know your staging date, you can check it here (you will need your PAYE reference).
You can bring your staging date forward if you wish – to do this you’ll need to contact The Pensions Regulator. You’ll also need to make sure that your automatic enrolment workplace pension supplier can support this. You can’t bring your staging date forward to a date within a month of the request.
At your staging date you’ll have five months to register your scheme with The Pensions Regulator (for more information see What do you need to do to comply?). Failure to do so may result in a fine.
When should I start planning?
We recommend you start six months ahead of your staging date to give yourself sufficient time to plan and make the necessary decisions, and implement your agreed method of compliance.
What is the cost of automatic enrolment?
For most employers, there will be a cost increase.
Initially this will include the cost of any professional advice and guidance sought during your pre-staging date planning phase. There may also be time costs associated with decision-making, procurement of compliance software and introducing new procedures.
Ongoing costs associated with automatic enrolment are likely to include:
Not all pension suppliers charge an employer fee; however a charge may apply, depending on which supplier you use.
How do I know which of my staff I need to enrol?
Under automatic enrolment rules, you are legally required to automatically enrol certain workers into your qualifying pension scheme and make contributions towards it. The Pensions Regulator defines a worker as any individual who:
For the majority of employers this will be simply those employees on its payroll, but you will need to check this by completing a worker assessment every time you run your payroll.
The table below sets out different worker types and which workers employers are required to enrol (eligible jobholders).
22 – SPA*
16 – 21 or
SPA – 74
Above £5,772 but
Have a right
to opt out
Have a right
16 – 74
Up to £5,772
16 – 74
*state pension age
If you have existing arrangements which some or all of your eligible jobholders are active members of, automatic enrolment may not be necessary. You’ll need to check with the pension supplier to identify whether the scheme(s) have been given “qualifying scheme” status. If so, then you won’t need to enrol these workers into your automatic enrolment scheme, provided minimum contributions are being paid into your qualifying scheme.
The table below provides further details of the employer duties for all worker types.
Type of worker
Eligible jobholders must be automatically enrolled into an automatic enrolment scheme unless they are an active member of a qualifying scheme. You must make at least the minimum contribution for these workers for as long as they remain an active member of the scheme.
Non-eligible jobholders must be offered the opportunity to opt in to an automatic enrolment scheme. You must make at least the minimum contribution for these workers for as long as they remain an active member of the scheme.
Entitled workers must be offered the opportunity to join a pension scheme. They can make contributions to the pension scheme if they choose but there is no requirement for you to make a contribution.
How much do I have to contribute?
There are two important decisions you need to make before your staging date:
The most widely used contribution model is based on qualifying earnings. Generally, total contributions for eligible jobholders must meet a minimum of 8% of qualifying earnings (also known as the relevant quality requirements or RQR) by October 2018.
Qualifying earnings include salary, wages, commission, bonuses, overtime, statutory sick pay and statutory maternity, paternity and adoption pay, that fall into a band of earnings between £5,824 and £42,385 per year.
Employers must eventually pay a minimum of 3% of qualifying earnings into a suitable workplace pension scheme.
An employer would be required to pay £10.44 per month (£125.28 per annum) for an eligible jobholder with total annual earnings of £10,000:
What is “phasing”?
Up until 1 October 2018, employers can use a mechanism called phasing, which allows them to use lower percentage contributions over a transition period. During that period, the employer must increase their contributions incrementally, as set out in the table below. If they choose to, employers can pay more than their minimum contribution requirement, which then reduces the contribution required from their employees.
Minimum requirements using phasing:
From Oct 2012 to
30 Sept 2017
From 1 Oct 2017 to
30 Sept 2018
1 Oct 2018
You don’t necessarily have to use qualifying earnings as your definition of pensionable pay – there are other options, for example, alternative quality requirements. These “certified” options negate the need for employers to undertake individual contribution calculations against the relevant quality requirements at each payroll period.
Certification could be achieved using one of the following alternative quality requirements:
*provided that basic pay constitutes at least 85% of total pay
How do I choose the right pension supplier?
On the Information for Employers section of their website, The Pensions Regulator states that:
“You must select a pension scheme which meets certain legal requirements. These include, for example, that the scheme does not require the worker’s consent to join, it allows workers to join from their first day of employment, it is tax registered in the UK and it allows for the minimum legal contributions from employers and workers.”
“You should also choose a good quality pension scheme that is well run, offers value for money and protects your workers’ retirement savings. Selecting a good quality pension scheme is not a difficult process and, from your perspective, it doesn’t have to cost more than a scheme which is of a lesser quality.”
Through our Easy option we offer access to a good quality scheme via The People’s Pension.
If you select Easy+ we will complete a pension supplier review on your behalf, taking into account the demographics of your workforce and your agreed contribution structure. We’ll recommend a pension supplier and provide an actuarial certificate to confirm that you’ve taken reasonable steps to ensure that the workplace pension it offers your workforce is suitable for automatic enrolment and that, based on the information provided, it’s an appropriate workplace pension for the needs of its workforce.
What are the requirements in terms of communicating with staff?
There are certain statutory communications you need to issue to workers from your staging date. These should be managed as part of your ongoing compliance process.
Every different worker type will need to be issued with a communication following their first assessment. If after the first assessment (i.e. in the pay period) there have been no changes to the worker profile and type on your payroll, there may be no new actions required. However, when you take on new workers you’ll need to assess them the first time they appear on your payroll. You also need to monitor workers on an ongoing basis as either of the following may trigger a change in worker category:
Also, every three years (from your staging date), you’ll need to re-enrol any workers who meet the eligible jobholder worker type – these workers may have opted out or ceased active membership of the scheme.
You may wish to tell staff about automatic enrolment and the decisions you’ve made ahead of your staging date. This will give workers the opportunity to understand what automatic enrolment means and how it may affect them.
What happens at my staging date?
You’ll need to be ready to comply from your staging date, even if you’ve decided to use staging date postponement.
Being ready means you should have your pension scheme, systems and processes in place to manage your new compliance duties. These processes include:
You’ll also need to tell The Pensions Regulator how you’ve complied by completing a Declaration of Compliance.
What happens after my staging date?
Your compliance duties are ongoing. This means you’ll need to continue to follow the processes listed above and take action each time you have a new duty for one or more of your workers.
Why should I seek advice and guidance on my automatic enrolment duties?
Meeting your automatic enrolment duties and setting up a workplace pension scheme can be a complex and confusing process. You need to make the right choices for your organisation and its employees.
Seeking advice will help you understand what you need to do to be ready for automatic enrolment and adopt the most appropriate strategy for your organisation.
Once you’ve implemented automatic enrolment, you’ll still be required to meet a number of ongoing compliance requirements – a good, qualified adviser will be able to help you with this.
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