What is automatic enrolment and why is it important?
Auto enrolment affects all employers with staff working in the UK and is a scheme introduced by the UK Government. It means that, rather than employees having to actively choose to join a pension scheme, staff are automatically put into one by their employer as a matter of course. If they do not wish to be included in the pension scheme, they must actively choose to opt out.
The law on workplace pensions has been changed to make it easier for millions more people to build up a pension, particularly those on lower incomes.
Setting up a pension scheme
There are many pension providers that you can choose from, and should you wish to do so, you should speak to an Independent Financial Advisor who can determine the best scheme for you as an employer and for your employees.
Alternatively, should you wish to provide a pension scheme for the purposes of auto-enrolment then the government run scheme, NEST is a scheme which was set-up for this purpose.
Who should be put into a pension scheme?
You must automatically enrol all staff who meet the following criteria:
· Aged 22 to state pension age
· Working in the UK
· Earning over £10,000 a year
Costs associated with the pension scheme
Compulsory employer contributions are the main costs associated with the pension scheme. Employers will have to pay a minimum employer contribution of 3% for everyone automatically enrolled and anyone who opts into the scheme.
There are also likely to be costs involved with the setting up and the administering of the scheme.
What is involved in administering a pension scheme
· Monthly Assessment of all current and new employees to determine their eligibility criteria.
· Preparing & sending pension letters to all employees when their eligibility changes.
· Uploading pension data to pension provider each month and ensuring Direct Debit is in place.
· Dealing with any opt-out notifications and refunds.
· Re-assessing and Re-enrolling all eligible employees every 3 years.
· Completing and submitting a declaration of compliance with The Pensions Regulator every 3 years.
What is a Re-Declaration of Compliance
Every 3 years you are required to re-assess all employees and re-enrol any employees that may have previously opted out of the scheme. Once you have completed your re-enrolment you will then be required to submit a re-declaration of compliance with The Pensions Regulator to confirm that you are complying with the auto-enrolment regulations.
What happens if you don't comply?
The responsibility for complying rests with the employer. If you don’t comply, you’ll face enforcement action in line with The Pension Regulators risk-based approach.
Enforcement action starts with statutory notices and is followed by penalty notices. Further non-compliance may result in court action.
What can we do to help?
If we process your payroll, we can help you with setting up a pension scheme and carrying out the monthly administration duties such as preparing and sending the relevant pension letters to your employees, uploading your monthly data to your pension provider and submitting your declaration of compliance.
Contacts
If you would like to discuss anything further or any issue affecting your business, then please do not hesitate to contact info@act.london or your usual ACT contact.