All UK employers must provide a qualifying workplace pension scheme, this is called auto enrolment.
Employer workplace pension duties include:
- Provide pension letters to all new employees within 6 weeks of their start date.
- Enrol any employees who are eligible, or employees that request to join a workplace pension scheme.
- Set up a qualifying workplace pension scheme if required.
- File a declaration of compliance with The Pensions Regulator.
- Assess all employees each pay period and load up pension contributions to your workplace pension scheme for those employees with contribution.
- Once every three years you will have re-enrolment duties which include re-enrolling any eligible employees previously opted out and filing a re-declaration of compliance with The Pensions Regulator.
APS can take you through the auto enrolment process, from producing pension letters for your employees, to setting up a qualifying workplace pension scheme, through to completing the declaration of compliance with The Pensions Regulator. APS’ one-off fees are as follows:
- Pension letter £5/letter.
- Scheme application £100.
- Declaration of compliance £35.
Employee assessment and status
The different employee statues form an important part of workplace pensions. The status of an employee determines what action needs taking and what your employer duties are. All employees are entitled to a workplace pension regardless of their status, though they don’t all need to be automatically enrolled.
The three employee statuses and the criteria are as follows:
- Eligible, employee aged between 22 and state pension age and earns at least £10,000 per year.
- Non-eligible, aged between 16 and 21 or between SPA and 74, earnings over £10,000 per year. Or, aged between 16 and 74 but earn between £6,240 and £10,000 per year.
- Entitled, aged between 16 and 74 and earn less than £6,240 per year.
The employee status determines what your employer duties are and the employee options.
Eligible, employee must be enrolled into a qualifying workplace pension scheme.
Non-eligible, the employee can request to join a qualifying workplace pension scheme and if they do the employer must contribute.
Entitled, the employee can request to join a workplace pension scheme however the employer doesn’t need to contribute, unless they want to.
What is re-enrolment?
Re-enrolment is part of an employer’s workplace pension duties which must be completed once every three years on or around the 3rd anniversary of the companies staging date.
Once you have selected your re-enrolment date within the 6-month timeframe (three months either side of your third anniversary staging date) you have two duties to complete. Firstly, during the usual assessment of employees during the payroll process any employees who have opted out previously, but are eligible on the chosen re-enrolment date, will have to be re-enrolled into a qualifying workplace pension scheme. If the employee has opted out within the last year, they are exempt from having to be re-enrolled. It’s worth noting once the employee has bene re-enrolled, they are allowed to out opt again as they had done previously.
If an employee is due to leave employment before the re-enrolment process has been completed the employer can choose whether to re-enrol the employee or not.
The second part of your re-enrolment duties is to complete a re-declaration of compliance with The Pensions Regulator. All employers, whether or not they have to re-enrol employees, must do this within 5 months of the third anniversary of their staging date. Failing to file the re-declaration of compliance before the deadline can result in fines from The Pensions Regulator so it’s worth making sure you are compliant.
Q – Does an employee who is eligible, but doesn’t want to join the pension scheme need to be enrolled?
A – Yes, the employee will need to be enrolled into a qualifying workplace pension scheme even if they don’t want to be part of a pension scheme. The employee can however choose to opt out once they’ve been enrolled.
Q – I’ve setup a new company. When do my workplace pension duties start?
A – Pension duties for a new company begin on your first employees start date. Don’t forgot that you need to supply the new employee with a pension letter within 6 weeks of their start date.
Q – Can I postpone the assessment of some/all my employees? And if so for how long?
A – You can legitimately postpone employees for up to three months. You do need to ensure you write to your employees, explaining what you are doing and their pension entitlements. An employee can choose to join the pension scheme before the postponement period finishes.
Q – Why when I try to calculate my pension contributions myself, does the figure come out higher than what is shown on my payslip?
A – Qualifying earnings, now this catches a lot of people out. We do have a blog on this subject which is linked to here! But in short, some pension schemes are set up to only calculate contributions based on earnings falling within a band and anything outside of this isn’t classed as pensionable earnings.
Q – Do the earnings thresholds change each tax year?
A – They can do and often have done previously, though the thresholds have stayed the same between the 2021/22 and 2022/23 tax years.
Q – How often does re-enrolment happen?
A – Re-enrolment must be completed once every three years. The Pensions Regulator (TPR) asks that the first time this is completed to be on the third anniversary of the companies staging date. Along with the re-enrolment of eligible employees, a declaration of compliance must also be filed with TPR. To find your re-enrolment duties date TPR have a useful tool which can be found here.