What is an Auto Enrolment Pension Scheme?
If you are a UK employer, you are required to enrol your employees into a pension scheme, and make contributions. This legislation, called Auto Enrolment, is part of the Pensions Act 2008.
Auto enrolment pension schemes are also known as occupational pensions; works, company or work-based pensions.
Auto enrolment does not only apply to businesses. If you directly employ at least one person, you are legally obliged to enrol them into a workplace pension. Please note, this individual could be, for example, a cleaner, gardener, nanny or care assistant. You must also contribute to the pension.
Do I Have to Auto Enrol Every Member of Staff into a Pension Scheme?
There are exceptions. You must enrol all members of staff who are aged between 22 and state pension age, who earn more than £10,000 annually, and who work in the UK.
Am I An Employer?
If you are unsure if auto enrolment is applicable to your circumstances, use The Pensions Regulator’s duties checker to find out.
As a basic guide, if you deduct income tax and national insurance contributions from your staff’s wages, you are probably their employer. However, if an agency supplied your member of staff, and the agency pays their wages, they would be the employer. In that case, you would not have to auto enrol that member of staff into a pension scheme.
How Much Do I Have to Contribute to Auto Enrolment Pensions?
Since 6th April 2019, the minimum that the employer must contribute is 3%.
Since 6th April 2019, the minimum staff contribution is 5%.
What Happens if I Contribute More Than the Minimum Amount into the Workplace Pension?
As an employer, you have a legal duty to make the minimum employer’s contributions to your employees’ occupational pensions. However, you are at liberty to pay more than this amount if you choose. If you opt to pay the total minimum contribution (covering your own and your employee’s percentages), then your employee would not have to pay anything.
Is a Workplace Pension Compulsory for my Employees?
No. It is compulsory for you, as an employer, to auto enrol every eligible member of staff into a work-based pension. However, employees are permitted to “opt out” if they do not want the pension. In that case, you must re-enrol eligible “opt out” members of staff once in every 3 years.
If you pay late or do not pay the minimum contribution for each member of staff, you may be fined by The Pensions Regulator.
Please get in touch with our friendly team for more advice, or to have your auto enrolment questions answered.