As an employer, you need to carry out all of the actions on this page.
The new Government scheme called Automatic enrolment (Auto Enrolment or AE) will require all employers to enrol eligible workers into a workplace pension scheme if they are not already in one. Official information is given by the Pensions Regulator which provides very useful information and should be reviewed by all employers.
This factsheet is intended as a minimum of information and does not describe some of the more detailed regulations and options.
Your start date, known as the staging date, can be found here.
If you do not register a pension scheme for all eligible employees by that date the penalties are from £50 per day for 1 to 4 employee businesses (more for employers with more employees). You can enrol earlier which may be beneficial to your employees; also it is predicted there will be a huge strain on the pension providers so getting in early may help avoid long waits.
Nominate a primary contact with The Pensions Regulator
The Pensions Regulator will send you a letter with a code which you must enter here to nominate a contact (a director of your company).
Choosing a pension scheme.
You will need to decide on a pension scheme provider. A starting point is to look here. You could consider any of the three national schemes specifically designed for Auto Enrolment. These are NEST, NOW and The People’s Pension. You could also consider the main branded providers (for
examples see here).
We are not allowed to give advice on pensions or any other investments, only an Independent Financial Adviser (IFA) can give advice on pensions. We cannot recommend or warn against any particular pension provider. If you would like contact details of an IFA who can help, please let me
know. Any IFA is likely to charge a significant fee for advice and setting up a pension scheme.
Setting up a pension scheme.
Once you have decided on pension scheme provider you need to set up a scheme with them. This should be set up six months before your staging date. There may be long delays as tens of thousands of employers will all be setting up schemes every month. We cannot advise on which scheme to use or set up the pension scheme for you.
Remember, employers and their accountants (you or us) must NOT give employees advice on pensions. Employees that want advice must get this from the scheme providers or an IFA.
Nominate a secondary contact with The Pensions Regulator
Enter your code from your Pensions Regulator here to nominate a secondary contact. This can be Green Accountancy with email address firstname.lastname@example.org. This can be done even if you have already entered a primary contact (which should always be someone at the employer).
Every employer must automatically enrol workers into a qualifying workplace pension scheme who:
- are not already in one. If you have an existing pension scheme you much check that it is Auto Enrolment compliant, many schemes are not AE compliant.
- are aged between 22 and State Pension Age
- earn more than £10,000 a year (more than £833 in any month). Once an employee is in your scheme they remain in the scheme, even if their salary goes below the £833 per month.
- ALL employees must be asked if they want to join your scheme. If they earn less than £5,824 then you will not have to add to their contributions.
Eligible employees cannot opt out before joining the scheme. Employees can opt out once in the scheme, but it is vital that employers never encourage employees to opt out.
When new employees join you may want to give them a postponement notice, to postpone their AE by up to three months. In such cases the employee can still opt to join the scheme.
Working out your minimum contributions
The simplest and most common method of calculating minimum contributions is called “banded earnings”. Under this method:
- The minimum contribution level is based on pay between £5,824 and £42,385 per year
- Earnings above £42,385 isn’t taken into account when working out how much contributions
- The rate applied to the relevant earnings figure is:
- Until 5 April 2018 – 2% total of which at least 1% from the employer
- From 6 April 2018 – 5% total of which at least 2% from the employer
- From 6 April 2019 – 8% total of which at least 3% from the employer
- Employees actually contribute 80% of their contribution, the government add 20%
Communicating with your employees
The Pensions Regulator recommends that you make your employees aware of auto enrolment. You may find some of the details here helpful.
You must write to each staff member after your staging date to tell them how automatic enrolment applies to them and explain their rights. You must let them know that contributions will be deducted from their pay and that they have a right to opt out of your pension scheme if they wish to do so. Template documents can be found here.
Notifying your pension scheme of your employees’ details and contributions
On or before your staging date you need to notify your pension scheme details of all of your eligible employees. You will notify them each time a new employee starts with you or becomes eligible for AE. Each month all contributions will need to be notified to the pension scheme. All of this can be done by Green Accountancy.
Finally You will need to notify Pension Regulator of your compliance by a declaration.