The law on workplace pensions has changed. Every employer with at least one member of staff now has new duties, including putting those who meet certain criteria into a workplace pension scheme and contributing towards it. This is called automatic enrolment. It’s called this because it’s automatic for your staff – they don’t have to do anything to be enrolled into your pension scheme. But it’s not automatic for you. You need to take steps to make sure they’re enrolled. BBPS can ease the burden & set up a full AE package for your business.
Who is affected?
When will auto-enrolment take effect?
New employer duties are being gradually introduced. They have already been applied to most organisations throughout the UK. The minimum contribution has been introduced at 2% of a worker’s pay. This will gradually rise to 8%.
How can we help?
As Auto-enrolment specialists our objective is to offer a holistic service to SME’s. Our aim is to ensure that SME’s are able to fulfil their new “Employer Duties” efficiently and with the minimum fuss. We will work with you to develop a solution which meets the needs of you and your employees.
The first steps . . .
Auto Enrolment Implementation
Automatic Enrolment means that Eligible Jobholders become members of the pension plan immediately. Employers will have to ensure their employees have information about the scheme and they will have to deduct pension contributions from the employee’s salary. Employees will be able to opt out but only after the first contribution has been deducted. All employers will have to ensure that they have a pension arrangement that complies with the new legislation. This can be an existing arrangement which may require some modification or a new arrangement.
Auto Enrolment Jargon Buster
Automatic Enrolment is a new concept to most people, the pension jargon is where some people are going wrong. That’s why we have come up with the Auto Enrolment Jargon Buster. There is now no need to be a financial adviser or pensions expert to understand what the changes mean.
If eligible employees aren’t already in a Qualifying Workplace Pension Scheme (QWPS), employers must automatically include them in one. The auto enrolment joining approach involves assessing the eligibility of the workforce each pay reference period and then joining eligible employees to the QWPS.
If employers aren’t sure that the amount of contributions paid to meet the default standard, they may want to certify that their scheme qualifies as a QWPS based on an alternative standard. The Department of Work and Pensions has produced detailed guidance on this, including a template certificate.
If eligible employees aren’t already in a QWPS, employers must automatically include them in one. The contract of employment approach involves joining employees to the pension scheme as part of their contact of employment. Because all new employees are joined this way, this significantly reduces the need to assess eligibility.
Under auto enrolment rules, employees don’t have to make an active investment decision. So every QWPS that accepts new members needs to offer a suitable option that employees’ contributions can automatically be invested into.
The deferral date is the date when employers must assess the employee(s) that a waiting period has been applied to, and automatically join them if they’re eligible.
A worker who:
Is aged between 22 and state pension age.
Has qualifying earnings above the earnings trigger for automatic enrolment.
A worker who:
Is aged between 16 and 74
Does not have qualifying earnings.
These employees are entitled to join a pension scheme, but employer payments are optional.
Lifestyle profiles are designed for people investing for retirement; as they get closer to retirement the investment aims of the profile of the profile move away from growth and towards preparing their pension pot for retirement. The funds used depend on the profile.
A worker who:
Is aged between 16 and 74
Has earnings above or below the ‘earnings trigger’ for automatic enrolment.
These employees aren’t eligible for auto enrolment, however they can choose to join a QWPS and receive employer payments
Employees have one month from the date they join the scheme to decide if they want to opt out of it. This is known as the opt out period. As part of the new duties, employers have a responsibility to deal with any employee requests to opt out of the scheme.
A pay reference period is a period over which an employee is paid, such as weekly or monthly. The pay reference period is not necessarily the same as the payroll period. For example, if an employee is paid for the work they between the 28th of one month and the 27th of the following month, then the first day of their pay reference period is the 28th; regardless of the date, they get paid.
The definition of a person’s earnings used in pension contribution calculations. This will vary according to the rules of a particular scheme but usually includes basic salary and may or may not include, for example, bonuses or commission.
This refers to the gradual increase of the minimum contribution into workers’ pension plans. Employer contributions start at 1% rising to 2% in October 2017 and then 3% in 2018.
By law, all employees ore obligated to tell their employees how pension reform will affect them. This means they need to send communications to their employees at certain times. Qualifying Workplace Pension Scheme A QWPS is a pension scheme that meets the government minimum standards- in particular, the minimum contribution levels. And if it’s going to accept new members, it must:
- Allow joining by auto enrolment.
- Have an appropriate default investment option
These are earnings used to decide whether an employee is an eligible jobholder or not. They are made up of: salary, commission, bonuses, overtime, statutory sick pay, statutory maternity, paternity and adoption pay. They are often referred to as band earnings.
A QWPS is a pension scheme that meets the government minimum standards- in particular, the minimum contribution levels. And if it’s going to accept new members, it must:
Allow joining by auto enrolment.
Have an appropriate default investment option.
The Pensions Regulator is the UK regulator of work-based pension schemes. We work with trustees, employers, pension specialists and business advisers, giving guidance on what is expected of them.
They also have functions under legislation passed in 2008 and astatutory objective to maximise compliance with the employer duties under that legislation relating to auto enrolment.
Salary exchange (also known as salary sacrifice), is an arrangement between an employer and their employee. The employee gives up part of their pay, and the employer pays this amount into their pension plan. Salary exchange could help meet some of the mandatory pension costs, reducing the finical burden for employers and employees. However, the employee needs to agree to salary exchange and its largely governed by employment laws.
Within four months of their staging date, employers must register their QWPS with The Pension Regulator. To do this, they need to provide certain information about the scheme and how they’re meeting their duties. The Pensions Regulator’s website explains exactly what information in needed.
Rather than meeting all thier pension reform duties immediately on their staging date, or when an employee first becomes eligible, employers can apply a waiting period to delay some of thier duties.
Using a waiting peroid of up to three months before enrolling employees to the pension scheme can help make the pension process fit the employers way of working. for example, waiting periods can be used to:
- stagger the enrolment of a large workforce
- align pension joining dates, and/or the opt out period, with their payroll process
- operate their usual pension joining process
- avoid joining temporary or lower paid employees different waiting periods can be applied to different categories of employees or individuals.
- Waiting periods are often referred to as postponement.
Your staging date can be found by following the link to The Pension Regulator’s website, and following the instructions. You will need your PAYE reference number. You can find this on a P6 /P9 coding notice.
NEST is a simple, great value pension scheme that employers can use to meet their new automatic enrolment duties.
The People’s Pension is a flexible and portable workplace pension, designed for people, not profit.
If you are automatically enrolled into a pension scheme you have the right to opt out of it.
You can opt out within one month of your enrolment date or one month from receiving your enrolment notification.
If you opt out within this time, any contributions you have made will be returned to you.
How do I opt out?
Contact your pension provider who will advise you.
All employers will have an obligation to provide specified information to their workers within prescribed time limits. Employers must give information to eligible jobholders who are being automatically enrolled. This information must include details of what automatic enrolment means for them, their right to opt out and opt back in and where they can find further information about pensions and savings for retirement. Employers must provide this information by no later than one month after the eligible jobholder’s automatic enrolment date.
For automatic enrolment, employees fall into three categories depending on age and salary. Employees who already belong to a qualifying company pension scheme are not eligible for auto enrolment.