By 2018, all UK employers will be required by law to automatically enroll eligible members of staff into a workplace pension scheme. This is to prepare them for when they choose to retire from work.
The auto-enrolment system was initially introduced in October 2012 as a legal requirement for large organisations only, with smaller organisations phased into the scheme year on year.
It will eventually be the obligation of all employers to establish their own pension scheme or use the government scheme set up specifically for this purpose.
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Who is eligible?
Employers are required to enrol workers – both part-time and full-time – in a workplace pension scheme providing they meet the following criteria:
The employee works in the UK.
The employee earns more than £10,000 a year (tax year 2016-17)
The employee is not already in a suitable workplace pension scheme
The employee is at least 22 years old, but under State Pension age
Opting out
Although all eligible employees must be automatically enrolled whether they want to or not, individuals can then choose to ‘opt out’ of the scheme at any time. However, the employer must follow the same process again to automatically enrol these workers in a pension scheme three years later.
Categories and employer contribution
Employees are assigned a particular category depending on their age and level of income. This category then determines whether or not the employer has to contribute to the pension, and how much they are due to pay in. Employers must initially contribute a minimum of 1%, but this level will increase to 2% from April 2018 – March 2019 and then 3% thereafter.
The law behind pensions
The Pensions Act 2008 is the main legislation covering workplace pensions.
Summary
By 2018, all employers must automatically enrol their eligible employees in a workplace pension scheme.
Once automatically enrolled, employees then have the option to opt out if they wish, however they must be automatically re-enrolled once three years has passed.
Employer contribution is set at an initial 1%, rising to 3% as of April 2019.
FAQs: What is a workplace pension?
When do employers’ duties start?
Employers’ legal duties commence on the ‘duties start date’, which is the day when an employee starts work.
What is a ‘Declaration of Compliance’?
Employers must submit this mandatory report to The Pensions Regulator (TPR) within five months of their duties start date. This must be completed even if employers have no eligible staff to enrol.
Can employers delay enrolment for new staff?
Employers can rely on ‘postponement’ to delay assessing and enrolling staff for up to three months. However, if this route is taken, employers must notify impacted employees within six weeks of their start date.
How much do employers have to pay?
They must contribute a minimum of 3% of an employee’s ‘qualifying earnings’.
When should employers pay the contributions?
Both employer and employee pension contributions should be paid to the provider by the 22nd of the month following the deduction.
Need help from Peninsula?
Peninsula offers expert advice on pensions. Our teams provide 24/7 HR advice which is available 365 days a year. We take care of everything when you work with our HR experts.
Want to find out more? Contact us on 0800 028 2420 and book a free consultation with an HR consultant today.
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