WHAT IS AUTOMATIC ENROLMENT?
People are living longer yet too many people are under-saving or not saving at all for what could be a long retirement. The law on workplace pensions has changed to make it easier for millions more people to build up a pension, particularly those on lower incomes.
Automatic enrolment means that, rather than having to actively choose to join a pension scheme, workers are put into one by their employer as a matter of course. To encourage people to stay in pensions saving, those who don't want to be in must actively choose to opt out.
Employers with staff working for them in the UK are affected by automatic enrolment and, as a result, there are actions they'll need to take.
The Pensions Regulator is the UK regulator of work based pension schemes and has a statutory duty to maximise employer compliance with the automatic enrolment duties. It does this through education and providing information and tools. It also has powers to take enforcement action, this includes fines.
KEY POINTS FOR ALL EMPLOYERS
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
WHEN WILL I HAVE TO DO IT?
Automatic enrolment duties come into force for an employer on their 'staging date.' An employer can find out their staging date by entering their PAYE reference into a tool on The Pensions Regulator's website. It should also appear on any letters the regulator sends directly to an employer about their duties.
There is the option to postpone automatic enrolment for up to three months from the employer's staging date. If an employer decides to do this, they won't need to automatically enrol anyone until the end of the postponement period.
Automatic enrolment is not a one-off event. Employers have ongoing duties such as paying into workers' pension schemes and assessing their workforce's eligibility, both new and existing members of staff, on an ongoing basis.
WHO DO I NEED TO PUT IN A PENSIONS SCHEME?
It's the age and earnings of a member of staff that determines what 'type' of worker they are and therefore what duties an employer will have in relation to them.
Employers must automatically enrol all staff who are:
- aged 22 to state pension age
- working in the UK
- earning over £9,440 a year.
Some staff who don't meet the criteria are able to opt-in to the pension scheme being used for automatic enrolment. They must be put in if they ask. Employers have to pay a minimum employer contribution for all staff they put into this scheme.
Certain other staff can ask to join a pension scheme. An employer must put these staff in a scheme, but the rules are different and there's no requirement to pay an employer contribution.
There's lots of practical support available on The Pensions Regulator's website. The staging date tool and an automatic enrolment timeline planner have proved popular with employers and their advisers. The planner helps employers find out what they'll need to do, when they'll need to do it and roughly how long each part will take.
WHAT ELSE DO I NEED TO DO?
Employers need to write to each member of staff individually to tell them how they've personally been affected by automatic enrolment. The information an employer needs to tell each worker is different depending on their rights and the duties the employer has in relation to them.
Employers must also provide certain information to The Pensions Regulator about how they've complied with their duties.
WHERE DO I START?
The first thing any employer should do is find out their staging date. Then they can start planning to make sure they're ready in time. There are several actions that need to be taken to prepare for automatic enrolment, such as:
- setting up a pension scheme or modifying an existing one
- making any necessary changes to payroll so it can handle the new requirements
- putting systems in place to monitor the ages and earnings of your staff (your payroll may be able to do this)
- writing to your staff
The Pensions Regulator recommends that employers have made arrangements with both a pension provider and a software provider six months before they are due to stage.