Workplace Pensions – Automatic Enrolment

 

What is automatic enrolment?

In an effort to encourage more people to save for their retirement, the Government has introduced new rules which require employers, and most employees, to save into a pension scheme.

Unless employees opt-out usually both the employer and the employee must pay contributions into the scheme. The provision of such a pension scheme and payments into it are mandatory with significant penalties on an employer for non compliance. Most people call this automatic enrolment, auto-enrolment or AE.

When does it start?

Your start date, which is known as your staging date, depends on the number of employees on your PAYE Scheme at 1 April 2012. We can offer guidance on your staging date. Larger employers started enrolling first in 2012 and the smallest ones from April 2017.

Who has to be enrolled?

Not all employees have to be automatically enrolled into pension saving, as some are exempt or only have the right to ask to join

Using age and specific earnings (as not all earnings count), each employee will fall into one of the following categories:

  • Eligible jobholders - have to be enrolled into a pension scheme and the employer has to pay pension contributions.

  • Non-eligible jobholders - have the right to ask to be enrolled into a pension scheme and if enrolled the employer has to pay pensions contributions.

  • Entitled workers - have the right to ask to be enrolled into a pension scheme but the employer doesn’t have to pay pension contributions. It does, however, have to make sure the scheme the employee joins is registered for tax purposes, deduct the employee's own contributions and pay them over to his or her chosen scheme.

Please remember, if you are a limited company, these requirements will apply to you as a director working for the company even if you have no other employees.

Choosing a pension scheme

You can use your existing pension scheme (providing it meets certain criteria), you can set up a new scheme especially for automatic enrolment, or you can use one provided by an external provider. You'll therefore need to establish the following:

  • Do I already have a pension scheme?

  • Can I use my existing scheme for automatic enrolment?

  • Do I want to use my existing scheme for some or all of my employees?

The Government has set up the National Employment Savings Trust (NEST) which is a pension scheme employers can use to enroll their employees if they do not want to select an alternative pension scheme for their employees/workers.

What you need to do

A very important part of automatic enrolment will be talking to employees about how this pension saving will work, what employees and their employers will pay.  You must give them ‘written’ information which means paper or email.

Simply signposting the employee to information held on a website or displayed on a poster in the workplace is not allowed.

As Financial Advisers Lyon Griffiths (Financial Services) Ltd is offering you any assistance you may require to comply with this new legislation from determining your staging date to choosing and setting up the best pension scheme for your business.

If you would like to talk to one of our team about this, please contact Helen Stockton on 01270 624445, to arrange an appointment. 

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