Changes to workplace pensions – Automatic Enrolment
The law on workplace pensions has changed. Every employer with at least one member of staff now has new duties, including putting those who meet certain criteria into a workplace pension scheme and contributing towards it.
This is called Automatic Enrolment. It’s called this because it’s automatic for your staff – they don’t have to do anything to be enrolled into your pension scheme. But it’s not automatic for you. You need to take steps to make sure they’re enrolled.
WHEN WILL THE CHANGE IN LAW AFFECT ME?
From your “Staging Date”, which differs from business to business. It is the date from which an employer must comply. We will advise you separately of your Staging Date.
What Employers Must Do (or we can do for you)
1. Know your Staging Date
2. Assess your workforce to know who to enrol
3. Review your pension arrangements
4. Communicate changes to all workers
5. Automatically enrol your “eligible jobholders”
6. Complete the Declaration of Compliance with the Pensions Regulator
7. Contribute to your workers’ pension
What is an Eligible Jobholder?
Aged from 22 – State Pensionable Age, working in the UK and earning over the auto-enrolment trigger (currently £10,000pa). However, other workers can opt in if they so choose, but their employers may or may not have to contribute, depending on certain factors such as age and earnings.
The cost to Employers
There is a minimum level of contribution that an employer must make, initially 1% – see below.
There will also be additional administrative costs and for ensuring that our clients are compliant on an on-going basis.
An existing scheme may be used or adapted or you may need to set up a new one, or you can use NEST – see opposite. We can recommend an IFA registered financial advisor to advise you if you wish
For Director- only payrolls you can opt out of Auto Enrolment. However, you must inform the Pensions Regulator of this (or we can do this for you).
Do Employers have to comply?
Yes. They must not influence or provide incentives to staff to opt out or discriminate against workers who opt in, or provide pensions advice to employees, and there are heavy penalties if they do. Compliance is also ensuring the correctly worded letter is sent to the right employee at the right time.
Do Employees have to join?
No, but they must not be coerced into not joining. They can join, then opt out, then opt back in again if they so wish. When they opt out, their employer does not need to contribute.
Minimum Contribution Levels
To 5 April 2018:
Employer 1% + Employee 1%
6 April 2018-5 April 2019:
Employer 2% + Employee 3%
6 April 2019 onwards:
Employer 3% + Employee 5%
Not all pensions providers will be interested in setting up schemes for smaller businesses. The National Employment Savings Trust (NEST) has been set up to satisfy all the workplace pension requirements and must accept all businesses.
Heavy fines for Non-Compliance
Starting from a minimum of £50 per day for inducing employees to opt out, depending on the size of the employer.