Auto enrolment

Auto Enrolment Explained

Are you fulfilling your ‘auto enrolment’ duties? Do you need help navigating the world of workplace pensions? Whilst auto enrolment affects every business in the UK, including those overseas who have employees in the UK, many employers remain unsure of their obligations and how auto enrolment will affect their businesses.

What is Auto Enrolment

In October 2012 the government introduced the requirement for employers to enrol their employees into a qualifying workplace pension scheme and make contributions without their employees having to take any action. Known as ‘automatic enrolment’, this change to workplace pension provision brought about a whole new set of legal and regulatory obligations for employers.

As an employer you are required to setup a workplace pension scheme on the first day you employ someone who meets the automatic enrolment eligibility criteria. This date is called your ‘Duties Start Date’. Under the rules, you can elect to postpone your duties start date by up to 3 months.

Setting up your scheme

There are many different workplace pension scheme providers for you to choose from. When selecting your scheme, you will need to ensure it meets the regulatory requirements and the needs of your workforce. You can select from basic schemes with limited features to schemes that offer a full range of benefits such as the option for employees to select their own investments and manage their pension online. 

Assessing your employees

When it comes to assessing your employees, you will need to identify which category or classification your workforce falls into. Employers have different duties and obligations for each employee depending upon their classification. There are three employee classifications, these are eligible jobholder, non-eligible jobholder and entitled worker, and are based on their age and earnings. In addition to this there may be other factors which can affect an employee’s eligibility.

Paying into your scheme

You will need to pay money into your workplace pension scheme, after you have enrolled your employees into it and every time you pay them. The amount you and your employees pay into your scheme may vary however, by law, you and your employees have to pay a minimum amount into your scheme unless your employee elects to opt out. The minimum is currently set at 8% of the employee’s qualifying earnings, of which you must pay at least 3% but you can choose to pay more. 

Calculating how much to pay

When you work out how much to pay into your workplace pension scheme you need to know what employee earnings to use in your calculation. This will depend on the contribution structure you choose. If you pay the minimum of 8%, you will need to base your calculation on a specific band of earnings (known as Qualifying Earnings). The qualifying earnings band is reviewed each year by the government. Alternatively, you can elect to calculate your contributions based on one of the three additional ‘Contribution Sets’ provided under the legislation.

Making payments

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You must agree the dates when you will pay contributions into the scheme with your scheme provider. However, by law, when you take contributions from your employees pay you must pay these to your pension scheme by the 22nd (19th if you pay by cheque) day of the next month. You may be fined by The Pensions Regulator if you don’t pay by the time you have agreed with your scheme provider.

Statutory communications & compliance

Under automatic enrolment you have a responsibility to issue statutory communications to your employees at different stages during the enrolment process, as well as throughout their membership of your scheme. These will include communications such as Postponement Notices (if you elect to use this option), Assessment Letters, and information about Opting Out. In addition, you will need to demonstrate your initial and continued compliance with the legislation. This will require you to certify and declare your scheme to The Pensions Regulator on setup and then regularly thereafter.    

How can we help

We can assist you with all your auto enrolment needs – from initial scheme design through to setup and your ongoing compliance requirements. We offer three different levels of service depending on your specific needs and our MWM advisers can help you decide the most suitable solution for your business.

Contacting MWM Employee Benefits

MWM Employee Benefits offices:

Lynton House
7-12 Tavistock Square

Telephone: +44 (0)20 7387 5868

3000A Parkway, Whitely
PO15 7FX

Tel: +44 (0)1489 582 011

MWM Employee Benefits Ltd is an authorised representative of Menzies Wealth Management who is authorised and regulated by the Financial Conduct Authority (486548). Registered address: 1st Floor, Midas House, 62 Goldsworth Road, Woking, GU21 6LQ Registered in England and Wales 06597008.