What Is Pensions (Auto Enrolment)?
Every employer in the UK must put certain staff into a workplace pension and contribute towards it. You count as an employer from the first day your first member of staff starts working for you. This is the date you have automatic enrolment duties.
What Duties Do You Have Under Auto Enrolment?
All employers have duties, but the duties you will need to carry out will depend on your individual circumstances. You will need to work out if you are required to provide a pension scheme or not however even if you do not need to provide a pension scheme you will still have other duties.
The Pension Regulator provide a free online tool in order to find out what your duties are here.
This tool will give you an outline of what your duties will be depending on your circumstances.
Key Dates Around Auto Enrolment
Duties Start Date
This is the date your first member of staff works for you. This is the date your legal duties begin for automatic enrolment. If you enter your staff into a pension scheme on this date, you will need to start paying contributions into the scheme from the next payday after this date.
Declaration of Compliance Deadline
This is the date by which you must tell the pension regulator how you have met your legal duties for automatic enrolment.
You can complete your Declaration of Compliance using pension regulator online form. They will write to you with a deadline however it is usually 5 months from your first employee.
This is a legal duty and you must do this even if you have no staff.
What To Do Next
When it comes to pensions and employees, there's only two options
- You need to provide a pension scheme
- You don't need to provide a pension scheme
I Need To Provide A Pension Scheme
You are required to provide a pension scheme and pay contributions if you have anyone that works for you that is:
- Aged 22 up to the state pension age
- And earns more than £833 per month (£192 per week)
1. Choose A Pension Scheme
You should do this as early as possible. You will be required to pay contributions into the scheme supporting your employees save for their retirement.
You will need to take a look at the different schemes available and see which one is suitable for your business. Picking the right scheme can be complicated and you need to ensure it is right. You are allowed to spend up to £500 through the business on Pension Advice. This is highly recommend as picking the wrong scheme, or setting up your Pension incorrectly can come back with big consequences and limitations.
2. Work Out Who Needs To Go In The Pension
You will need to put your staff into your pension scheme on your duties start date and you will need to start paying contributions into it from the next payday after this date.
Your employees will need to be paying at least the minimum contributions required (you can find this from your pension scheme provider). The current minimum pension contribution is 8% of their staff earnings.
The employer must pay at least 3% of this, but can choose to pay more.
3. Write To Your Staff
You are legally required to write to your staff individually explaining how automatic enrolment applies to them. You must do this within 6 weeks after your duties start date.
You can view free letter templates from the pension regulator for free here.
4. Declare Your Compliance
You have a deadline to complete this 5 months after your duties start date.
Failure to do this can result in fines.
I Don't Need To Provide A Pension
You are not required to provide a pension if nobody who works for you is:
- Aged 22 to the state pension age
- Earns more than £833 per month (£192 per week)
- If there are no employment contracts (common in family companies/director companies)
If this is case, all is well however you still have other legal duties you need to take care of.
1. Write To Staff
If you are sure you don't have to have a pension scheme and have made the initial assessment using the pension regulator online tool
then it is your legal duty to write to all your staff individually, explaining how automatic enrolment applies to them, even if you do not have to put anyone in a pension scheme.
You can download free letter templates here.
2. Declare Your Compliance
You have a deadline of 5 months to complete your Declaration of Compliance after your staf date.
This is a legal duty and failure to do this can result in fines.
If you have staff that need to be put into a pension scheme, you will have to backdate any pension contributions you may have missed. Both you and your employee will be required to pay their contributions (you are able to pay your employees for them).
You must backdate your contributions to the date your staff first met the requirements to be placed in a workplace pension.
Declaration of Compliance
What is the Declaration of Compliance? Your declaration is your legal duty to show how you have met your legal duties. You can complete this form online on the pension regulator website.
You must complete the declaration by the deadline specified in your letter.
You can get your accountant to complete this for you however it is your legal duty to ensure it is completed and submitted on time and the information is correct.
Once you have completed your required duties and declaration of compliance, there are still ongoing duties that will need your attention.
- Assessing any new staff you take on to see if they meet the pension criteria.
- Monitoring the ages and earnings of your staff every time you pay them to see if they need to be put into a pension scheme
- Paying at least their minimum contribution levels if they are in a pension scheme.
- Dealing with any employee requests about joining or leaving the pension scheme.
- Keeping accurate records of what you have done.
Every 3 years after your duties start date, you are required to assess your staff who are not in a pension scheme. This include staffs who were originally enrolled but have since left your pension scheme.
If they meet the criteria to be put back into your pension scheme, then you must do so. This is known as re-enrolment. You will then need to to complete and submit a re-declaration of compliance to tell us how you have met your re-enrolment duties.
The pension regulator will keep you up to date of your requirements.
If you need any support in regards with pensions obligations and compliance, please speak to the Saint Financial Group team today.
This article was written for Construction Insider and Saint Financial Group. Saint is a multidisciplinary group based in the UK that helps construction businesses develop and grow. SaintFG offers a range of quality solutions in supporting businesses.
Saint provides the luxury of free business consultancy for all of our clients, call now for your free consultation with a friendly business advisor to discuss your burning questions and put that energy back into your business!