Pension Auto Enrolment Compliance Checks

HMRC have advised that The Pension Regulator has been carrying out compliance checks with large employers during which they found a number of errors.

We have identified errors in pension set up or contributions when we have taken over established payrolls so we know errors are made and it is easily done if you don't have an understanding of how your pension scheme works.

Earnings Threshold

One of the errors the Pension Regulator found was that the earnings thresholds were incorrect.  The thresholds are updated at the start of each tax year and whilst some may not change at all there may be small changes to some of the thresholds.  For example, for 2022-23 the upper threshold for contributions was increased from the previous year.  Your payroll software should incorporate these changes with their updates for each tax year but it is still worth being aware of the changes.

Other errors which could easily occur

• Employees are not enrolled in your pension scheme because they say they don't want to be.  All eligible employees must be put into the pension scheme, even if they choose to opt out straight away.  As long as they opt out quickly (within 6 weeks) their contribution (and yours) will be refunded via their pay.
• Employees are not enrolled into the scheme when they become eligible either by age or salary.  If your software doesn't flag up their eligibility for you it is easy to forget to do this.
• Your pension scheme has been set up incorrectly in your payroll software.  With some schemes contributions are deducted before tax is calculated meaning the employee pays less tax.  Other schemes have pension contributions deducted from net pay with the tax relief being added to their pension pot.  The scheme decides the method, you can't choose which way it works.  It is therefore important that you understand which method and set it up correctly in your payroll software.  If it is not set up correctly your employee will not receive the tax relief they are due.
• A pension contribution is made by the employer for the employee under salary sacrifice.  In this instance there must be an agreement between the employer and the employee to reduce their salary by the agreed pension contribution amount.  If there is no written agreement there is no proof that this is a salary sacrifice arrangement and the employee can continue to receive their original salary plus the pension contribution.

It pays to get it right  

If you are unsure whether your pension scheme is set up correctly you should check it.  It could be costly, whatever error you make.  There are financial penalties from The Pension Regulator if you have not followed the rules and if you have not enrolled an employee into the scheme when you should have you will be liable to pay both the employer and employee contributions back to the date when they should have gone into the scheme.

We have seen this happen with clients who have not set up a scheme and/or not enrolled eligible employees into it.  We have also seen The Pension Regulator issues fines for non-submission of pension information.

Three years after your original Staging Date you are required to re-enrol with The Pension Regulator and re-enrol staff who have opted out.  Whilst The Pension Regulator provide plenty of notice for you to do this, if you don't do it there are likely to be fines.

Need some help?

We provide a payroll and auto enrolment service for our clients and we guarantee that none of these errors will occur.  When we have taken on payrolls where there have been issues with the pension scheme set up we have sorted this out.  In some cases the employer has had to accept the fine for their earlier errors but once we have it sorted there will definitely be no more errors and no more fines.

So if you want to hand over the concern that you may not be getting things right give us a call and we will talk through with you how we can help.