What is auto-enrolment?
To help workers to save for their retirement the Government introduced a new legal requirement for employers to provide a workplace pension to eligible employees.
Every existing business was required to set up and enrol workers, if they are not already in an equivalent scheme, with employers required to contribute to each individual’s pension fund.
The process of autoenrollment has ended now for most, but businesses must ensure they meet the requirements of auto-enrolment when onboarding new members of staff who meet specific criteria.
Who is affected by the workplace pension rules?
Anyone aged from 22 to the state pension age earning more than £10,000 will be automatically enrolled in their employer’s pension scheme.
Those who fall below this threshold can still join and receive employers’ contributions, but employers are under no obligation to enrol them automatically.
Those aged under 22 must automatically join the scheme when they either reach that age or start earning above the threshold.
Employees can choose to leave a scheme at any time and any pension built up will stay in place, although they won’t be able to get their contributions back. They can also re-join at any time.
Do employers have to re-enrol staff?
Re-enrolment and re-declaration must be completed every three years. Employers must re-enrol staff who left the workplace pension scheme, or reduced their contributions, back into the scheme and complete a re-declaration of compliance.
Auto-enrolment declarations must be completed within five calendar months of the third anniversary of the business’s original staging date.
How much do employers have to pay into employee’s pensions?
When the scheme was first launched employees were only expected to pay a minimum of 1% of their salary into their pension, with employers topping this up to a minimum of 2% in total.
However, since 2018 pension contributions must amount to at least 8% of an employee’s salary, with at least 3% coming from the employer.
It is up to the employer whether they contribute the remaining 5% or whether this contribution is made by the employee.
Although 8% is the minimum total contribution, an employer can offer a more generous pension entitlement should they wish to.
The employer already offers a workplace pension scheme, do they need to change it?
Provided the existing scheme meets the minimum standards for auto-enrolment then an employer can continue to use it, although they will need to register it with The Pensions Regulator (TPR). Businesses need to re-register the scheme every three years.
Do employers need to use a specific pension provider?
Employers can choose which provider they use. NEST, the National Employment Savings Trust, is just one possible provider of pensions via auto-enrolment.
It may not necessarily be the best scheme for every business, which is why it is important to seek independent advice.
We have thoroughly researched workplace pension provisions and would be happy to offer employers tailored advice.
What if an employer doesn’t want to offer a workplace pension?
Workplace pensions are not optional and employers have a duty to offer employees an appropriate scheme.
Employees can choose to leave the scheme if they wish, but employers are legally obliged to offer one in the first place. Employers face substantial fines and even imprisonment if they do not comply.
How can Lamont Pridmore help?
At Lamont Pridmore, we have assisted many businesses and employers with the implementation and ongoing management of the auto-enrolment and workplace pension rules.
We can take care of everything for you, from helping you find the most appropriate scheme for your business to ensuring you continue to meet your obligations in terms of record-keeping and reporting.
By alleviating this burden, you are free to focus on what you do best – running and growing your business.
Want to know more?