Auto Enrolment: Introduction

This introduction to Auto Enrolment will explain some of the details and processes behind the changes to UK pensions and employment law.

Welcome to our Work Pensions Auto Enrolment guide. This is a basic introduction and does not cover every circumstance. If you have further questions then call either the Pensions Regulator or the Qtac support team – contact details for both are near the bottom of this web-page.

Introduction

This law means that every employer must automatically enrol workers into a workplace pension scheme if they:

• Are aged between 22 and State Pension Age
• Earn more than £10,000 a year 
• Work in the UK
  
  

Every company will be required to offer employees the chance to join a pension scheme. Both the employee and employer will contribute to the pension.

Don’t panic! When auto enrolment comes into effect depends on the number of employees in your company – so you still may not be staging for some time.

Every company must have a pension in place for the employees to be enrolled. This could be a new pension or an existing pension as long as this pension ‘qualifies’. This means the employee and employer contributions match or exceed the minimum contributions and that no restrictions are placed on membership.

If a company does not have a qualifying pension scheme then it MUST BY LAW introduce one.

There are a number of schemes being made available which are likely to offer different pros and cons for both employee and employer. Employers will have a responsibility to ensure they have a compliant pension scheme in place and that the correct employees and employers contributions are paid into the scheme.

The average life span has increased and people are living for longer. The changes to pensions are because the current state pension will just not be enough and it’s trying to encourage people to save for their retirement.

Employer FAQs

Q: What’s changing?
A: Pension Legislation in the UK is to undergo the biggest change for generations. This legislation will affect ALL employers. Both the employee and employer can make a contribution into the pension, though the employer is legally required to make a minimum contribution.

Q: Why is this being introduced?
A: People are living longer and not enough people are saving for retirement or are not saving enough. Auto enrolment pensions are being introduced so workers can save for their retirement whilst they earn.

Q: When does this come into place?
A: That depends on the size of your company. You will have a staging date dependant on the size of your company. The largest employees will have an earlier staging date, whilst the smaller employee will have later staging dates. See the ‘Staging Dates’ section earlier in this manual.

Q: What if I have an existing pension scheme?
A: You must check with your existing pension provider that it is a qualifying scheme. Any existing scheme must qualify, meaning that the contributions paid by both the employee and employer (or any benefits) at least match the minimum contributions specified for auto enrolment.

Q: Who would be automatically enrolled into the pension scheme?
A: Employers will automatically enrol workers who:

• Are not already in a qualifying pension scheme
• Are aged 22 or over
• Are under State Pension age
• Earn more than £10,000 a year (this figure is reviewed every year) and work or normally work in the UK.

Q: What pension contributions do I need to make?
A: See the ‘Contributions’ section below.

Q: When do I have to pay these contributions?
A: It depends on the pension scheme, but contributions would normally be required to be paid to the pension provider at least every month. Talk with your pension provider about this.

Q: Do I have to register with ‘The Pensions Regulator’?
A: Yes, employers MUST register with The Pension Regulator to confirm they have complied with auto enrolment. See the ‘Pensions Regulator’ section of this guide for more info.

Q: What should I do now?
A: If you run your own payroll ‘in-house’ then decide which pension provider you will use. If your payroll is run by an agent, find out if the agent will be providing any Auto Enrolment Pension services.

Q: What shouldn’t I do?
A: Encourage anyone to opt out of the pension scheme or base your recruitment process around people willing to opt out.

Q: Who can I speak to for help?
A: Speak with your Pension Provider first if you have one. You can also seek advice from The Pensions Regulator. You can also speak to us for some help though we can’t by law give out pension advice.

Employee FAQs

Q: Do I have to start paying into a pension?
A: No. You can choose to opt out if you want. It’s your decision.

Q: Why is this being introduced?
A: People are living longer and not enough people are saving for retirement or are not saving enough. Auto enrolment pensions are being introduced so workers can save for their retirement whilst they earn.

Q: What does this mean for me?
A: The easiest way to explain what’s happening would be using an example:

Q: Will I be automatically enrolled?
A: You can find out by going to: www.gov.uk/auto-enrolled-into-workplace-pension

Q: What if I’m self employed or run my own company?
A: If you are self employed or the sole director of your own company and have no employees, then you have no duties under Auto Enrolment legislation.

Auto Enrolment Pension Contributions

Contributions means the amount both the employee and employer will contribute to the employee’s pension pot. For many companies this may involve an increased cost for each employee enrolled into the pension. Below is the proposed contribution period (This may still change):

**These percentages and dates could be subject to change.

++ If the employee pays income tax, the government will add money to the pension in the form of tax relief.

The tax relief will be shown differently depending on the pension type being used – either a ‘Net Pay Agreement’ or a ‘Relief at Source’. If running a  ‘Net Pay Agreement’ pension the employee will see a 1% reduction on their payslip. Running a ‘Relief At Source’ pension, the employee will see the 0.8% on the payslip. The 0.2% tax relief is added by the government.

Note that these contributions are based on the minimum employer contributions. For example, the minimum employer contribution up to 5th April 2018 is 1% and the minimum total contributions are 2%. This means the employer could choose to contribute the whole 2% and the employee to contribute 0%.

Pensions Regulator

Find out more about The Pensions Regulator: 
www.thepensionsregulator.gov.uk

The Pensions Regulator is overseeing the implementation of auto enrolment workplace pensions. They have been setup to educate relevant groups in the legal requirements of auto enrolment and also to enforce compliance. Employers MUST register with the Pensions Regulator to confirm the company is complying with the changes to employee pension. The deadline for registering is 5 months after the company’s staging date.

Employers will need to provide a number of details when registering with The Pensions Regulator, such as:

• Employer details – Name, Address, Email and all PAYE reference numbers.
• Details of the pension scheme(s) being used – Scheme name, Address, Employer Pension Scheme Reference (EPSR), Pension Scheme Registry number (if you have one).
• The number of workers employed on the staging date or on the last day of any postponement periods.
• Number of eligible jobholders automatically enrolled into the pension scheme.

Employers may receive penalties/fines for late registration.

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