Worlds Biggest Coffee Morning/Business Networking Event - Friday 30 September 2016
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Pension Auto Enrolment
The government is placing greater responsibility and sometimes higher costs on employers. Employers are/will be required to provide access to pension provision for their employees. If you are an employer based in the East Midlands we can provide help and advice of your auto-enrolment responsibilities. We operate primarily in the Northampton, Peterborough and Milton Keynes area but are happy to assist employers across the UK. .The role of the employer
To encourage more people to save in pension schemes, the government has placed greater responsibility on employers to provide access to pension provision.
Up until 1 October 2012 there was no requirement for an employer to pay employer contributions into a scheme. There was also no requirement for the employee to enter an employer provided scheme.
Most employers were however obliged to designate a registered stakeholder scheme that employees could join. This obligation has been removed due to the advent of automatic enrolment (or auto enrolment).What is automatic enrolment?
Automatic enrolment places new duties on employers to automatically enrol 'workers' into a work based pension scheme. The main duties are:
assess the types of workers in the business
provide a qualifying automatic enrolment pension scheme for the relevant workers
write to most of their workers explaining what automatic enrolment into a workplace pension means for them
automatically enrol all 'eligible jobholders' into the scheme and pay employer contributions
complete the declaration of compliance and keep records.
Assessing the types of workers in the business
Whether this is an easy or difficult task depends on the type of business. A business which uses the services of casual workers, very young or very old workers will need to spend some time in analysing its workforce. A business which only employs salaried staff will have an easier task.
A 'worker' is:
an employee or
a person who has a contract to provide work or services personally and is not undertaking the work as part of their own business.
The second category is defined in the same way as a 'worker' in employment law. Such people, although not employees, are entitled to core employment rights such as the National Minimum Wage. Individuals in this category include some agency workers and some short-term casual workers.
There are three categories of workers: eligible jobholders; non-eligible jobholders; and entitled workers.
An 'eligible jobholder' is a worker who is:
aged between 22 years and the State Pension Age
earning over the minimum earnings threshold (£10,000 for 2016/17)
working or ordinarily working in the UK
not already in a qualifying pension scheme.
Most workers will be eligible jobholders unless the employer already has a qualifying pension scheme. These are the workers for which automatic enrolment will be required.
Other workers (non-eligible jobholders) may have the right to either 'opt in' (i.e. join a scheme) and therefore to be treated as eligible jobholders. 'Entitled workers' are entitled to join the scheme but there is no requirement on the employer to make employer contributions in respect of these workers.
The categorisation of workers can be difficult in some circumstances. Please contact us if you are unsure of how to assess the types of workers you have.When does automatic enrolment apply to an employer?
The law came into force for very large employers on 1 October 2012 but fortunately, the automatic enrolment rules have a staggered implementation by reference to the number of employees.
An employer can precisely work out when the automatic enrolment rules will have to be applied as the implementation date (known as the 'staging date') is set by reference to the number of persons in an employer's PAYE scheme on 1 April 2012.
The more employees an employer has on that date, the earlier the staging date.
There are special rules for such employers.
An employer can find out the detailed staging date rules from: www.thepensionregulator.co.uk.Communicating with your workers
Employers are required to write to all workers (except those aged under 16, or 75 and over) explaining what automatic enrolment into a workplace pension means for them.
There are different information requirements for each category of worker. For an eligible jobholder, the letter must include details of how the employee can opt out of the scheme if they wish. The letter must not, however, encourage the employee to opt out.
The Pensions Regulator has developed a set of letter templates to help you when writing to your workers.Automatic enrolment of eligible jobholders and payment of contributions
As part of the automatic enrolment process, employers will need to make contributions to the pension scheme for eligible jobholders. In principle, contributions will be due from the staging date but it is possible to postpone automatic enrolment for some or all employees for a period of up to three months. This may, for example, be used to avoid calculation of contributions on part-period earnings.
All businesses will need to contribute at least 3% on the 'qualifying pensionable earnings' for eligible jobholders. However, to help employers adjust, compulsory contributions will be phased in, starting at 1% before eventually rising to 3%.
There will also be a total minimum contribution which will need to be paid by employees if the employer does not meet the total minimum contributions. If the employer only pays the employer's minimum contribution, employees' contributions will start at 1% of their salary, before eventually rising to 4%. An additional 1% in the form of tax relief will mean that there is a minimum 8% contribution rate.
Earnings cover cash elements of pay including overtime and bonuses (gross) but minimum contributions are not calculated on all the earnings. Contributions will be payable on earnings between the lower threshold of £5,824 and the higher threshold of £43,000 for 2016/17. The earnings between these amounts are called qualifying earnings. The thresholds are reviewed by the government each tax year.
The Pensions Regulator was established to regulate work-based pensions.
An employer must complete the declaration of compliance within five months of the staging date. In essence the declaration of compliance process requires the employer to:
confirm the correct auto enrolment procedures have been followed and
provide various pieces of information such as the number of eligible jobholders enrolled.
Finally, an employer must keep records which will enable them to prove that they have complied with their duties. Keeping accurate records also makes good business sense because it can help an employer to:
avoid or resolve potential disputes with employees
help check or reconcile contributions made to the pension scheme.
Pensions Regulator guidance for small businesses
TPR guidance is available for small businesses preparing for automatic enrolment on their website.
Using the guidance employers can follow an 11 step process, each step advising when each task should be completed and and how long it should take. The guidance also includes links to tools and resources to help employers meet their duties.
How we can help
Simply Pension Auto Enrolment can help you to manage the road to automatic enrolment and help you to comply with the requirements when you are in automatic enrolment. Contact us now for a no obligation discussion.
Contact Simply Pension Auto Enrolment
Simply Pension Auto Enrolment, Moulton Park Business Centre, Moulton Park, Northampton, NN3 6AQ
Tel: 07762 771290
Pension Auto Enrolment