AUTO-ENROLMENT... a message from Tax Director, Kathy Martin
PENSION AUTO ENROLMENT & YOUR BUSINESS
Pension auto-enrolment is a significant new requirement that will be imposed upon virtually all employers and a potential new service we are considering to assist employers deal with the administrative burden.
In October 2012, new legislation was introduced to require every employer to have a pension scheme in place and automatically enrol all workers into it with only a few exceptions. Employers will have to make a contribution to the pension scheme in respect of all members.
We set out below further details which we hope will answer most of your immediate questions but will stress now that doing nothing is not an option and, as always, there will be adverse consequences of getting it wrong; the Pensions Regulator is able to impose fines (which they have already started to do) and even threaten imprisonment if Employers fail to comply.
- Will this apply to my business?
This will apply to all businesses employing anyone other than those Companies which only employ a Director at a rate of pay below the auto enrolment earnings trigger (see point 4).
On 1 September 2013 all employers with a PAYE scheme dealing with 1250 or more employees have been required to implement auto enrolment. Thereafter, at the beginning of most months, the requirement will extend to a further segment of Employers. We note some staging dates below to illustrate this.
By 1 January 2014
all employers with more than 349 employees
By 1 January 2015
all employers with more than 57 employees
By 1 April 2015
all employers with more than 49 employees
Thereafter all Employers - depending upon their PAYE reference - will be obliged to implement auto enrolment at various dates up to 1 August 2017.
- Which Employees does this apply to?
As an employer, you will have new duties in relation to everyone working for you in the UK and is aged between 16 and 74.
The ages and earnings of your workforce at the appropriate date will determine which employee is required to be auto enrolled, which employee is entitled to request to be auto enrolled with the remainder retaining the existing entitlement to belong to a pension scheme.
- Which employees need to be automatically enrolled (eligible employees)?
- who is aged between 22 and state pension age and
- who works in the UK and
- who is likely to have gross earnings over £9,440 in a year (this will probably increase each year)
See the accompanying schedule for details.
The main things you must do are:
- provide a qualifying scheme for your employees. If you already have a scheme it is unlikely to fully comply with the requirements and this will need to be addressed.
- automatically enrol all eligible employees onto the scheme
- pay employer contributions for eligible employees to the scheme
- tell all eligible employees that:
- they have been automatically enrolled and
- they have the right to opt out if they want to do so
- register with the Pensions Regulator and give them details of your qualifying scheme and the number of people that you have automatically enrolled.
There are certain things the employer must not do, both before a person starts working for them and once that person is a member of a pension scheme with that employer; these principally relate to inducing employees to opt out.
- How much do I have to pay?
You will have to make regular payments into the pension schemes of all staff who you automatically enrol and all those who choose to opt in.
The law has set a minimum level for employer contributions which will start at 1% and rise to 3% of gross earnings by October 2018. Employees contributions start at 2% and rise to 5% over the same period. Gross earnings will include salary, wages, commission, bonuses, overtime, statutory sick pay and statutory maternity, paternity and adoption pay. It is not certain at the moment what basis period (weekly, monthly etc) will be used to calculate gross earnings.
The Pensions Regulator will be writing to all employers whose staging date is less than 18 months away providing them with a unique letter code. Your staging date is determined by the total number of persons in your largest PAYE scheme, based on information from HMRC held at 1 April 2012. To find out your staging date, you will need your PAYE reference number. You can also find out your likely staging date now on the Pensions Regulator website at:
We are considering offering a pension auto enrolment service which will enable you to pass on the entire administration of your scheme to ourselves. Naturally there will be a charge for this, so if you are interested in using such a service please let us know and we will discuss it further with you and provide you with a quote once we have an indication of the level of interest amongst our clients.
Please do not hesitate to contact Kathy Martin should you wish to discuss any of these issues or how they may affect your business