But what does this actually mean?
What is pension auto enrolment?
Pension auto enrolment may not seem like the most riveting subject but it is beneficial to gain an understanding of it as it will affect most of us. New government workplace pension’s legislation requires all employers with staff in the UK to provide a qualifying workplace pension scheme. Implementation (staging date) is determined by the size of the employer’s largest PAYE scheme. Over 5 million employees across the UK’s largest employers (around 100,000 so far) have already enrolled. A further 1 million small and medium employers are still to enrol between now and 2018.
So, why has this been introduced? Well, the current state pension is funded by National Insurance Contributions (NICs) and the number of working vs retired is estimated currently to be 3:2. However, by 2050, this is estimated to be 2:3 (in 1901 it was 10:1!). Longer life expectancy means NICs simply won’t cover the cost of retirement.
Who does it apply to?
An eligible jobholder is any worker who ordinarily works in the UK and is aged between 22 and the State Pension Age (SPA), and earns over £10,000 per year. Eligible employees must be automatically enrolled but employees can opt-out (but can’t be encouraged to!).
Non-Eligible Jobholders (under 22’s and over SPA or employees earnings less than £10,000 but more than £5,772 per year) do not have to be automatically enrolled but can ask to join the pension scheme. The employer must contribute if they decide to opt in.
Entitled Workers (any employee earning under £5,772 per year) do not have to be automatically enrolled but can ask to join the pension scheme. The employer has no obligation to contribute.
What are an employer’s duties?
All employers must comply from their ‘staging date’. They must select a qualifying pension scheme, choose the scheme design and assess their workforce. Communication must be made to employees and they must be kept up to date of any changes after each assessment. The workforce must be assessed before the staging date and at each pay period after staging date, however don’t worry as payroll software usually deals with this.
The qualifying pension scheme must:
- Be tax registered;
- Meet minimum criteria
- Be registered in the UK or EEA
- Have no barrier to auto enrolment
- Be a qualifying scheme
Postponement is generally used if an employer needs more time, has high staff turnover or temporary workers on short term contracts. They can postpone for up to 3 months but will still need to have a scheme in place on their staging date and comply with the legislation. There is a requirement to issue Statutory Postponement Notices to all workers and employees do have the option to ‘opt-in’ immediately during the postponement period.
And if employers don’t comply?
The Pension Regulators ‘police’ this very aggressively so it is worth playing by the rules! There have already been fines and prosecutions issued for non-compliance. Fixed fines for non-compliance and based on ‘warnings’ and daily fines for continued non-compliance after a warnings. Fines can however be up to £50k per organisation in worst cases – ouch!
How can Sapphire help?
Sapphire specialise in taking the hassle out of running your payroll, which includes your Auto Enrolment requirements. Our staff are trained and qualified to deal with your requirements and ensure your business remains compliant without you having to worry. Please contact us on 01625 539997 for a free, no obligation chat about our services.