What Is Automatic Enrolment?
All About Auto Enrolment and What To Do Next
What is automatic enrolment?
The law on workplace pensions has changed. Every employer with at least one member of staff now has new duties, including enrolling those who are eligible into a workplace pension scheme and contributing towards it. This is called automatic enrolment.
It is called automatic enrolment because it is automatic for your staff – they don't have to do anything to be enrolled into your pension scheme, but it is not automatic for you. You need to take steps to make sure your eligible staff are enrolled into a pension scheme. Even if you already pay contributions into a pension scheme for your staff, you still need to check if it is suitable for automatic enrolment.
The following tasks in particular will take you some time:
- setting up a pension scheme
- enrolling your staff into the pension scheme. Contributions to the scheme come from three places. You will make deductions from their pay, you will make employer contributions and the government will contribute via tax relief. You'll need to make sure you contribute the right amount
Ideally, you should allow up to 12 months to prepare. Remember, automatic enrolment is your legal duty and if you don't act you could be fined.
What you need to Do
1. Know your staging date
Your first step towards automatically enrolling your staff is to find out when your automatic enrolment duties come into effect for you. This is known as your staging date.
2. Provide a point of contact
You will shortly receive a letter from the Pensions Regulator requesting that you advise them who will be responsible for automatic enrolment within your business so that they can send information to help you prepare. It is important that you go online and complete this procedure. The information you require is shown on the letter. i.e. PAYE reference and letter reference. Should you have any problems we will be happy to help.
3. Check who you need to enrol
Review your current staff to get an idea of your responsibilities to them and work out whether you are likely to have to automatically enrol any of them.
4. Create your action plan
Create your action plan for the months ahead; don't leave making your plans until the last minute! If you’re planning to speak to an independent financial adviser, now is the time to do so.
You may want to consider using us as your accountant and payroll provider – to carry out some or all of your tasks on your behalf. However, remember that complying with the legal duties of automatic enrolment is still your responsibility. If you fail to complete your automatic enrolment duties, you could be fined.
By your staging date, you should have everything in place and be ready to enrol your staff into your automatic enrolment pension scheme. After your staging date, you must write to your staff to tell them about your pension scheme and how automatic enrolment applies to them.
5. Your ongoing automatic enrolment duties
Once you’ve put your staff into your pension scheme, you will have ongoing responsibilities. You’ll need to; continue to pay contributions; keep records and constantly review your staff including new starters. The table below shows the minimum amounts you'll need to contribute:
|DATE||EMPLOYER MINIMUM CONTRIBUTION||TOTAL MINIMUM CONTRIBUTION|
|Before 5/4/18||1%||2% (including 1% staff contribution)|
|06/04/18 - 05/04/19||2%||5% (including 3% staff contribution)|
|06/04/2019 onwards||3%||8% (including 5% staff contribution)|
When you start paying these contributions after your staging date, they'll need to be calculated and deducted via your payroll process. There may also be one-off costs to consider, such as setting up your scheme, managing automatic enrolment via the payroll and any independent advice you might decide to take.
You need to pay your contributions to your staff pension scheme on time. You must agree the dates for paying contributions to the scheme with your trustee or provider. The law requires that, when you deduct contributions, you must pay these to your pension scheme no later than the 22nd day (19th if you pay by cheque) of the next month.
You must write to each staff member after your staging date to tell them how automatic enrolment applies to them and explain their rights. You must let them know that contributions will be deducted from their pay and that they have a right to opt out of your pension scheme if they wish to do so. You must write to staff who are being automatically enrolled explaining what you’ve done and providing details of the pension scheme you’ve chosen for them.
You can choose to postpone automatic enrolment for up to 3 months. You must write to your staff to tell them you’re postponing automatic enrolment for them. One of the times you can postpone is from your staging date.
6. Complete your declaration of compliance
You must complete your declaration of compliance after your staging date to state how you’ve complied with your duties.
Should you require this service we would be happy to assist by either assessing and uploading details to your pension provider and arranging payment by direct debit from your bank account on a specified date each month along with all the requirement of collating the letters for each member of staff to enable you to remain fully compliant or simply assess each individual employee and advise the amount to be deducted. Please telephone or email for further information.
Gundry Stone can communicate directly with many of the major pension providers, including those listed below:
- The People’s Pension
- Beaufort Consulting
- Carey Pensions
- Creative Pension Trust
- Friendly Pensions
- Friends Life
- Legal & General
- The Pensions Trust
- Royal London
- Scottish Widows Assist Me
- Scottish Widows Standard
- Standard Life
- True Potential
- Trust Pensions
- Workers Pension Trust
* More information can be found on the Moneysoft Payroll website, where some of this content was sourced