If you are an employer, it is now law that you must offer your employees a pension scheme that they can sign up to and you enrol them in to it. This is called automatic enrolment.
It is automatic for your staff, but not for you. You need to take steps in order to make sure that your eligible staff are enrolled. If you already pay contributions into a pension scheme for your staff, you will still need to check if it is suitable for automatic enrolment as some pension schemes will not be valid.
Who needs to do it?
If you employ even just one person you will need to check as you may still be affected. Employers who need to get themselves set up for it are:
- Those who directly employ someone. If you are using an agency, then you are not affected, but the agency will be.
- For example if you employ a Nanny or Carer directly and they are earning enough to be eligible, you will still need to do this. If you employ a Nanny or Carer through an agency, then you will not be affected as the agency will be responsible.
- Your employee earns a certain amount. This is currently set at £10,000 per year for tax year 2015/16.
- The person you employ is between 22 and State pension age.
- The person is working in the UK under a contract of employment.
I employ someone younger than 22, do I need to do anything?
If they want to join a pension scheme, then you are obliged to do it, though if you pay them less than £10,000 per year (2015-16), you don’t have to automatically enrol them. If they wish to have a pension scheme, you need to set one up for them, but you don’t need to pay into it until they are earning more than £5,824 but less than £10,000 per year.
This also applies to someone between their state pension age and 75.
I need to do this, so how do I choose a pension scheme?
- The Pension Regulator’s website has a list of providers who have automatic enrolment pension schemes. http://www.thepensionsregulator.gov.uk/employers/finding-a-provider.aspx
- It also gives you advice as to how to choose a pension scheme. http://www.thepensionsregulator.gov.uk/employers/choose-a-pension-scheme-or-check-your-existing-one.aspx
For an employer that doesn’t have a pension scheme set up and doesn’t want to set an independent scheme up, the Government have approved a scheme called NEST National Employment Savings Trust, which accepts everyone who has been automatically enrolled into their employer’s workplace pension scheme. It doesn’t matter how few or many employees you have, NEST have to accept you if you wish to choose them.
When do I need to set them up?
If you haven’t already set up a pension scheme in readiness for your employees, then you need to think about this now. According to the Pensions Regulator’s website, there are things that you need to have in place before this date as this is when your automatic enrolment duties begin, so give yourself plenty of time to get ready.
There is what is known as a Staging Date and this is the date that you have to be ready for because it is the date when the law comes in to effect for your business.
You can find out your staging date through the Pensions Regulator’s website, they have an online calculator set up. All you need is your PAYE reference. Go into the following link and enter that, and it will bring up your staging date. http://www.thepensionsregulator.gov.uk/employers/know-your-staging-date.aspx
If you are not sure about your PAYE reference, you can find it on a P6 / P9 coding notice or on your white payslip booklet P30BC.
There are some exceptions to this, so if your staging date does not come up, then you could be one of the following:-
- You may have already notified the Pensions Regulator and brought your staging date forward, so these new dates won’t be reflected by the online tool.
- You set your business up after 1st April 2012. If this is you, then there is a table in this link that will tell you your date: http://www.thepensionsregulator.gov.uk/employers/exceptions.aspx
- You may have changed your PAYE reference or acquired a new one since 1st April 2012. In this case you need to enter your old reference.
- You have certain types of staff members and you don’t have a PAYE scheme. For these cases your staging date will be 1st April 2017. This is also the case if you had less than 30 staff on the 1st April 2012.
Bringing the date forward.
Any employer can bring their staging date forward. You may want to do this to align several businesses in a group company, or you may choose to set it up with the start of your financial year. This can be done online via the Pensions Regulator.
The Pensions Regulator suggests that you start to get plans in place at least 9 months to one year ahead of your staging date in order to give yourself time to choose a pension scheme, work out who is eligible and get them registered to enrol in it when the time comes.
It may be worth speaking to an Independent Financial Advisor who can help you choose the right pension plan for your company.
How much do I need to pay into them?
Remember to consider the one off costs associated with setting up a pension scheme, such as professional advice, new payroll software and setting up the scheme itself. You will need to budget for this before considering how much you will be able to pay into each employee’s pension.
You will need to ensure that you pay a regular contribution into your staff pension scheme. By law there are minimum amounts that you will need to contribute.
- If you are enrolling your employee between now and 30th September 2017, then the minimum you will have to contribute is 1% of their salary into the scheme. You pay 0.8% and the government pay 0.2%.
- If you are enrolling your employee between 1st October 2017 and 30th September 2018, then the minimum you will have to contribute is 2% of their salary into the scheme.
- If you are enrolling your employee from 1st October 2018 onwards, then the minimum you will have to contribute is 3% of their salary into the scheme.
The Pension Regulator’s website has a contribution calculator to help you work out what you will need to pay as a minimum. The payments you make will need to be calculated and deducted within your payroll process.
Contribution calculator: http://www.thepensionsregulator.gov.uk/employers/employer-contributions.aspx
What do I need to do at my staging date?
There are several things you need to have in place and tasks to complete.
By this date:
- You should have your pension scheme and payroll set up and ready and your staff registered to enrol.
- You can postpone for up to three months for some of your staff. You must write to them and inform them of this in advance.
- You must write to all your staff informing them that you have set up a staff pension scheme and explain how automatic enrolment applies to them.
- Once they are enrolled, you need to ensure that contributions are regularly entered and checked and that employee information is kept up to date.
- You must complete a declaration of compliance to the Pensions Regulator to inform them that you have everything in place.
Lastly, if you are an employee and want to know more about how this scheme affects you, then go to the Pensions Advisory Service website as this will explain it all from the employee’s point of view: http://www.pensionsadvisoryservice.org.uk/about-pensions/pensions-basics/automatic-enrolment