Workplace Pensions Update for Employers (Auto-Enrolment)

The Labour government introduced legislation The Pensions Act 2008 that required all employers to ensure that they have pensions scheme in place for their employees.

Summary on Workplace Pensions and Auto-enrollment

If an employer doesn’t have a scheme in place already, they are required to create one which includes the following basic parameters;

  • Pension schemes can be Defined Contribution, Defined Benefit, Hybrids, or the new simple, low cost pension scheme, NEST (National Employment Savings Trust), formerly known as personal accounts
  • Employee contributes at least 3% by year 3, which qualifies for tax  relief
  • Employer contributes at least 5% by year 3, which qualifies for tax relief
  • Employees may opt out, but only after the scheme is set up!!!
  • Employees are automatically enrolled into the pension scheme if
    • Aged 22 or over up to the State Pension Age (whatever that is at the time – 65, 67, or 68 if born on or after 6 April 1978)
    • Earn more than £10,000 PA – contractually or practically?
    • Work in the UK
  • As a guide, staging dates to for your scheme to commence are, for
    • 50 or more employees, 1 April 2015
    • Fewer than 30 employees, between 1 July 2015 and 1 April 2017
    • Organisations without a PAYE scheme, 1 April 2017

 

What employers need to do

  1. You are advised to commence preparations at least 6 months before your auto-enrollment staging date.
  2. What's your staging date? You can find out what your organisation’s auto-enrollment staging date from TPR’s website at http://www.thepensionsregulator.gov.uk/employers/staging-date.aspx
  3. Nominate a contact point within your organisation
  4. Choose a type of scheme and a provider
    • Pension schemes can be Defined Contribution, Defined Benefit, Hybrids, or the new simple, low cost pension scheme, NEST (National Employment Savings Trust), formerly known as personal accounts
    • You should contact your Financial Advisor, or The Association of British Insurers (https://www.abi.org.uk/) if you don’t have one. Ask if they have NAPF's Pension Quality Mark website (http://www.pensionqualitymark.org.uk/)
  5. Complete the process and submit your Declaration of Compliance to the Pension Regulator no later than 5 months after your auto-enrolment date.
  6. Employees may only opt out AFTER the scheme has been created, registered, and put in place!!!

 

Notes for employers

  • Every employer with at least one member of staff now has new duties, including putting those who meet certain criteria into a workplace pension scheme and contributing towards it.
  • Employers, non-compliance can result in Fixed penalty notices (up to £50,000) Escalating penalty notices (fines or up to £10,000 per day), starting off at £400
  • Pension Regulator should have written to you to tell you your Staging Date i.e. when your scheme needs to be in place, if not use the Staging Date Tool and enter your PAYE reference at The Pensions Regulator website at http://www.thepensionsregulator.gov.uk/employers/staging-date.aspx
    • 50 or more deadline has passed 1 April 2015
    • Fewer than 30 1 July 2015 – 1 April 2017
    • Don’t have a PAYE scheme – 1 April 2017
    • http://www.nowpensions.com/auto-enrolment-staging-dates/
    • Get Out Clasue: If you are the sole director and there are no other staff working for you, the company does not have automatic enrolment duties, but you must contact TPR to advise them of your status and off course any changes in future
    • No Respite For Some: If you directly employ one or more people to provide you with care or personal assistance, you’re an employer and automatic enrolment duties will apply to you. This will be the case whether you use the money provided by your local council in the form of direct payments or a personal budget to pay the carer, or you use your own money.
  • Questions to ask providers
    • Questions you should ask about the legal requirements include:
      • Does the scheme allow at least the minimum contribution levels?
      • Does the scheme allow staff to join it without providing any information?
      • Does the scheme allow staff to join it without making any choices, eg about where their money is invested?
    • Questions you should ask about the quality of the scheme include:
      • Do you ensure that the investments on offer are appropriate now and in the future?
      • Will you regularly review costs and charges to ensure they are still value for money?
      • Is compensation available if anything goes wrong?
      • Are members’ options clearly communicated as they approach retirement?

 

Information for employees

  • Normal pension rules will apply e.g. when you can start drawing your pension, and how much
  • Additionally, you can also qualify for the State Pension at what ever level is still available when you retire, subject to you having made appropriate levels of NIC contributions during your working life.

 

More information at

Previous article on the Pensions Act 2008 - click here

NEST Pensions - click here

Money Advisory Service - click here



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