Update to Auto Enrolment – The Pension Regulator publishes detailed guidance.
The Pensions Regulator has published an updated version of the Employers Detailed Guidance on automatic enrolment.
The changes to the regulations came in to force from 1st November 2013, the changes are reflected their guides. Also The Pension Regulator has added guidance on automatic re-enrolment and they have expanded the resource on ‘Information to Worker’, into a guide.
What is auto-enrolment?
As a result of the new government initiative, employers will be obliged to enrol employees in to a workplace pension scheme. The qualifying criteria are as follows:
- Employees aged between 22 and state pension age must be enrolled.
- Earn more than £9,440.00 a year
- Work within the UK
Employers will also have to make contributions for qualifying workers.
Employees between the age of 16 and 74 and earning between £5,668 and £9,440 a year have the right to opt in to the pension scheme, while those aged between 16 and 74 but earning less than £5,668 have the right to join. You do not need to follow the automatic enrolment process for employees in the latter group who decide to join.
- Automatic enrolment affects all employers with staff in the UK.
- You must enrol certain staff into a pension scheme.
- You must start doing this from your staging date, though there is an option to postpone automatic enrolment for up to three months.
- You must write to all your staff to tell them how they’ve been affected.
The guides are listed as follows:
What is the deadline?
This depends on the size of your business. Employers will receive their staging dates, this is the date that they must comply and automatically enrol qualifying employees. The deadline has already passed for the largest employers.
You can find out your relevant staging date by using the interactive tool on the Pensions Regulator website. Firms with fewer than 30 employees will have to comply by dates between 1 November 2015 and 1 April 2017.
What do I need to do?
There are several key responsibilities on all employers. You must:
• Provide a qualifying workplace pension scheme
• Register with and provide details of the scheme to the Pensions Regulator
• Automatically enrol all qualifying workers into the scheme
• Make contributions into the scheme for all qualifying workers
• Provide relevant information to all qualifying workers
What is the Cost to businesses?
Auto-Enrolment will mean an additional cost for Employers. You will be required to make minimum contributions for eligible workers. The contribution rate will be phased in, gradually increasing up to October 2018.
• From October 2012 to September 2017 minimum contributions of 2 per cent must be made, of which you must contribute at least 1 per cent
• From October 2017 to September 2018 minimum contributions of 5 per cent must be made, of which you must contribute at least 2 per cent
• From October 2018 minimum contributions of 8 per cent must be made, of which you must contribute at least 3 per cent.
You can work out your relevant minimum contributions using the Pensions Regulator’s tool.
Employers have a choice in relation to their pension provider. Larger businesses might choose to operate their own pension scheme, whereas smaller businesses can choose to outsource the scheme to a private provider. There is also the government’s provision which could potentially reduce the cost to the small business significantly.
The government scheme is called the National Employment Savings Trust, or NEST. It has been designed for automatic enrolment, and may provide the most cost effective solution for small businesses. It is fully online, and can be administered almost entirely through NEST’s own online dashboard. Crucially it has no set-up charges, and boasts low costs for members. Employers do not have to pay anything other than their contributions when using NEST. Instead, charges are levied on individual members, at an annual rate of 0.3 per cent of the total value of the member’s fund, and at 1.8 per cent on each new member contribution.
If you already operate a PAYE scheme you can expect to receive a letter from the Pensions Regulator 12 months prior to your staging date. If you sign up for NEST now, you will also receive ‘countdown emails’. They will then guide you through the process of setting up.
It is important to understand that NEST is not the only available option, and you may wish to seek independent advice before making a decision.
We appreciate that all of this may seem a daunting process, we are able to act as administrators in the auto-enrolment process due to our specialist knowledge and partnering software. If you would like assistance then please do not hesitate in contacting us.