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Business Services  •  financial advice  •  pensions  •  Personal tax  •  Probate and Inheritance Tax

Getting ready for pensions automatic enrolment – employer duties

By Lesley Stalker on 15 April, 2014

Starting from October 2012 every employer will need to have a workplace pension scheme in place and will have to automatically enrol certain workers into the scheme and make pension contributions on their behalf.  The system started at the beginning of October 2012 with staff who work for the biggest businesses, with others being signed up over the following six years.

These new employer duties are designed to encourage more people to save for their retirement. They are detailed within hundreds of pages of legislation which cover what your duties are, when they will apply and what happens if you don’t comply with them.

 

Costs associated with the pension scheme

Compulsory employer contributions are the main costs associated with the pension scheme. You will have to pay a minimum employer contribution for everyone you automatically enrol and for anyone who opts in.

The minimum amount is being phased in, starting at 1% and rising to 3% of employees’ qualifying earnings.

Other costs will vary depending on your provider and the scheme you choose.

 

Know your staging date

The staging date is a key piece of information when planning ahead for automatic enrolment – this is the date by which your business must be compliant. Once you know this, you can work back from this date to plan what preparations you need to make and when.

An employer’s staging date is determined by the number of employees in the largest PAYE scheme that they use, based on the latest data from HMRC held by The Pensions Regulator on 1 April 2012. You will need your employer’s PAYE reference(s) to find out your staging date.

 

What you need to do

Here are some of the things you will need to do before, on and after your staging date:

 

Before your staging date:

  • Assess how your workforce will be structured on your staging date to determine what duties you will have for each type of worker;
  • Choose a pension scheme for workers who will be automatically enrolled and agree how this will be set up;
  • Choose a pension scheme for workers who will be given the option to join and agree how this will be set up;
  • Engage with you payroll providers;
  • Communicate the changes to your workforce.

 

On your staging date:

  • Tell your workforce how automatic enrolment affects them;
  • Automatically enrol certain workers into your pension scheme;
  • Invite other types of workers to join your pension scheme.

 

After your staging date:

  • You must register with The Pensions Regulator (TPR) within four months of your staging date;
  • Maintain records to prove compliance with the employer duties;
  • Continue to automatically enrol certain workers into your pension scheme;
  • Run an opt-in/ joining process for other workers;
  • Ensure the correct contributions are deducted and paid into the pension scheme;
  • Manage opt-outs, process refunds and re-enrol workers roughly every three years; monitor age and earnings regularly as workers can move between different categories;
  • Re-register with TPR roughly every three years.

It’s clear there is a lot of work to do to meet your employer duties and it’s important to start this work as early as possible so that you don’t get caught out.

If you already offer an existing pension scheme it may qualify for auto enrolment, but in order to do so it must meet certain criteria.

Some hefty penalties exist for non-compliant employers. If you have not already introduced a workplace pension scheme that qualifies for auto-enrolment, you may need to engage an expert to support you.

 

Understanding who is eligible for automatic pension enrolment

The first element to understand is how to classify your workforce to establish which of your employees are eligible for automatic enrolment. This is based on their total earnings and will affect your requirement to make a contribution to the scheme on their behalf.

Those who work in the UK, are aged over 22 and under the state pension age, are not already in a scheme, and earn more than £8,105 a year will automatically be enrolled.

Part-time workers who earn less than that can ask to be enrolled and, if they earn more than £5,564, you are obliged to make a contribution too.

Those aged under 22, or over state pension age and still working, can also opt-in in the same way.

If you require assistance with automatic enrolment, we recommend that you speak to an expert. They can guide you through the key elements and ensure you are ready for the deadline in good time.  For more information about specialists who can assist, please contact Lesley Stalker by emailing las@rjp.co.uk.

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