There are a number of fundamental changes being made to the responsibilities for employers generally, and in particular, in addition to the more onerous requirements of ‘real time information’, over the coming years employers will be required to automatically enrol eligible staff into a recognised pension scheme.
For the largest employers the regulations have already come into place but for those with far fewer employees the implementation or ‘staging date’ not come into effect until some point in the next couple of years, the precise date being dependant on the number of employees.
Employers responsibilities can be summarised as follows:
- Find your staging date
- Establish eligible staff
- Ensure a Pension Scheme is in place
- Provide details of staff to the Scheme
- Process any ‘opt outs’
- Calculate any contributions due
- Find Your Staging Date
The staging date is based on the number of persons in your PAYE Scheme on
1 April 2012, and in general terms for employers with between 160 and 249 staff this date will not be until after 1 April 2014, ranging to beyond 1 October 2015 for those employers with less than 30 staff. Precise details as to how to establish your staging date is provided on the Pensions Regulator website (www.thepensionsregulator.gov.uk).
- Establish Eligible Staff
You will be required to enrol all staff aged between 22 and State Pension age earning over £8,105 per year. For those aged 16-21 or State Pension age to 74 and earning over £8,105 per year you will be required to provide information to these staff about their right to opt into a Pension Scheme. For any staff aged between 16-24 earning over £5,564 but less than £8,105 again you will be required to provide them with details about their right to opt into a Pension Scheme. Finally for any other staff earning less than £5,564 and aged between 16-74 you are required merely to provide them with details about their right to join a Pension Scheme.
- Ensure a Pension Scheme is in Place
Having established which employees are eligible for enrolment it will be necessary to ensure an appropriate Pension Scheme is in place. It is possible an existing Pension Schemes may qualify for this purpose and reference to the Scheme provider to ensure this is correct is the easiest course of action.
If you do not already have an existing scheme or do not wish to set up one, then subject to certain criteria it is possible to use the Government organised alternative, or NEST (National Employment Savings Trust) which is available for employers to use on its own or alongside an existing scheme. At this point reference to an Independent Financial Advisor is recommended to ensure you have the best solution in place. If you do not already have such an advisor and would like our help in choosing one, we would be happy to assist.
- Provide Details of Staff to Scheme
Having established a scheme as above it will then be necessary to provide full details of the scheme provider of each member of staff and this will include their name, address, date of birth, and National Insurance number. At the same time staff should be provided with information about automatic enrolment, and their individual right to opt out of the scheme if they have been enrolled.
- Process ‘opt outs’
Staff have the right to opt out of pension scheme membership after they have automatically been enrolled, and if a member of staff decides to opt out they must complete the appropriate from and provide it to you within one month of being automatically enrolled.
- Calculate Contributions Due
Generally for eligible employees total contributions of 8% of earnings between £5,564 and £42,475 are due of which a minimum of 3% is due from the employer and the remaining 5% from the employee. Higher amounts can be contributed by either party if desired.
As with any fundamental change to employers obligations there are a number of issues to consider and the above is very much a brief outline of the key factors at this point, but hope it has been of some use.
Should you wish to discuss any aspect of this further please do not hesitate to contact us.
John Elliott
Tax Partner
