How do I handle it?
Patricia Rooney, Director at Tughans examines the following problem and offers practical advice…
We operate a small local company. I have heard a lot about auto enrolment and staging dates and requirement to provide a pension for our employees. Some of the staff are already members of an occupational pension scheme but I am confused as to what I need to do.
The obligation for pension auto enrolment applies to all employers within the UK and your staging date, that is the date on which you must enrol all your eligible employees into a workplace pension scheme, depends on the number of staff you employed on 1 April 2012. If you had less than 30 staff at that time, your staging date will be 1 April 2017.
Your obligation is to enrol staff within a workplace pension and make contributions to that pension scheme. You must write to them about this too. The staff eligible for auto enrolment are determined by their age and earnings. Generally, you would be obliged to enrol all staff who are aged over 22 and under state pension age, who work in the UK and earn at least £10,000 per annum. Once this threshold is reached, you must enrol that employee for pension entitlement. You have one month in which to enrol that person, from the date on which they become eligible, but can postpone this for up to 3 months if certain requirements are met and you give notice to the employee.
You should also know that you will be required to automatically re-enrol eligible employees in the pension scheme every 3 years.
A worker does have the right to opt out of the auto enrolment requirements but you should not take any steps which might be interpreted as an inducement for staff to opt out of the pension scheme. Also, you must ensure that you do not subject any worker to a detriment in relation to their participation in the pension scheme.
You have mentioned that you have a number of staff who are already members of an occupational pension scheme. It may be that you could use that pension scheme for your auto enrolment requirements for all of the employees. If your pension scheme is an existing defined contribution arrangement it might be a qualifying scheme for the purposes of the auto enrolment pension requirements and I suggest you seek advice from the scheme administrator for that purpose.
If the existing scheme is not a qualifying scheme, you will have to establish a scheme that will meet your obligations for the purposes of auto enrolment for all your staff. Many pension providers offer such schemes and there is also NEST – the National Employment Savings Trust – established by the government especially for auto enrolment.
You must also ensure you register with the Pensions Regulator and provide information to them. You should be aware that if you fail to co-operate with the Regulator or provide pension arrangements for staff, you could face enforcement action and in a worst case scenario, a fine or imprisonment.
The minimum contribution for pension under auto enrolment is currently 2% of the employee’s qualifying earnings. This means you must pay at least 1% and the remainder is paid from the employee’s salary. You can, if you wish, pay more than the current employer’s 1% contribution and it may be you are already doing that under your current scheme. You should know that contributions will be increased over the next few years with the combined contribution increasing to 8% from October 2018 onwards and of that you must pay 3%.
I would suggest you should take some time to audit your employees’ details/records in order to assess your staging date and who must be automatically enrolled. You should also enquire from your current pension provider whether your existing scheme will be suitable for use to meet your auto enrolment obligations. It is estimated it takes about 6 months’ preparation to ensure you are ready for your staging date.
While great care has been taken in the preparation of the content of this article, it does not purport to be a comprehensive statement of the relevant law and full professional advice should be taken before any action is taken in reliance on any item covered.