Reminder of the key points of auto enrolment
With pension contributions rising from 6th April 2018 it seems like a good time to remind employers of the key points about auto enrolment.
Pension Contribution Rates
From 6th April 2018 pension contributions rise from 1% to 2% for employers and from 1% to 3% for employees. These contributions are taken from gross pay before or after tax depending on the type of scheme you have set up.
Communicate with New Employees
New employees must be told about your auto enrolment pension scheme within 6 weeks of their start date even if they are not eligible to join it. They must receive a letter from you setting out the details of the scheme and the age group bandings and earnings levels so that they can easily see which category they are in.
Postpone New Employees
Employees can be postponed from joining the scheme for up to 3 months. Postponement usually occurs for a new employee or from the Staging Date. If you do not provide your new employee with communication about your pension scheme within 6 weeks of their start date The Pension Regulator will expect you to enrol them in the scheme and to pay the employer contributions from their start date. The employee may, if they wish, make contributions from their start date.
Employees can choose to join the pension scheme at any time even if they do not fit the criteria to be auto enrolled or are within their 3 month postponement period.
Employee Opt Out
All employees aged between 22 and the state pension age earning over £833 per month (£192 per week) must be enrolled into the pension scheme. They cannot opt out before they have been put in it. If the employee wants to opt out they must do so via the pension scheme provider within 6 weeks of receiving their enrolment pack and their contribution will be refunded to them. If they miss the deadline for opting out the pension contribution will remain in the scheme but no further contributions will be added.
Employers must not encourage employees to opt out of the pension scheme.
Record Keeping
You must keep records of employees, gross earnings and employee and employer pension contributions for 6 years.
You must keep requests from employees to join the scheme or notifications to opt out of the scheme. Opt out notices need to be kept for 4 years.
You must keep details of the pension scheme for 6 years.
You must provide the pension scheme with details of gross earnings and pension contributions for each pay period and pay across contributions by 22nd of each month following the pay period.
Do I need a pension scheme?
If you do not have any employees between the age of 22 and state pension age you do not need a scheme.
If you are the sole director of a company you do not need a scheme.
If your only employees are directors who do not have employment contracts you do not need a scheme.
If you are self-employed or freelance you do not need a scheme.
If you do not need a scheme you must tell The Pension Regulator.
If you are a new employer and your employee is between the age of 22 and state pension age and earning about £833 per month you will need to set up a pension scheme as soon as you register as an employer.
Ongoing Administration
- Communication with new employees
- Deduct pension contributions from pay
- Monitor employee ages and earnings
- Submit earnings and deductions to pension scheme
- Pay contributions by due date
- Maintain pension records
- Re-enrol opt outs after 3 years
- Complete Re-Declaration of Compliance