Auto-enrolment & workplace pension
According to data from the Pensions Regulator it’s brought over 9,937,000 people into auto-enrolment schemes and involved more than 1,400,918 employers.
By making workplace pension saving the default option, it’s helped more employees save towards retirement where previously they might not have had access to a workplace scheme.
If you are an employer it’s likely this is something you’re already well aware of, but with minimum contribution rates rising again in April 2019 employers need to make sure they are prepared for the change.
Here’s a reminder of how auto-enrolment works, and what employers responsibilities are.
Employers will need to check which of their staff are eligible for auto-enrolment.
Employees who work in the UK, earn more than £10,000 a year, and are aged between 22 and state pension age, must be auto-enrolled into a pension scheme.
What do employers need to do?
Aside from setting up the scheme and making sure all eligible employees are included, employers have some additional responsibilities.
Employers and employees are both required to make a minimum contribution to auto-enrolment pension schemes.
In most schemes, this contribution is only made on the employee’s qualifying earnings.
The lower limit for qualifying earnings in 2018/19 is £6,032, while the upper limit is £46,350, so the percentage is taken from the pay that falls between these two limits.
In 2018/19, employers minimum contribution to employees’ pensions is 2% of their qualifying earnings, this will rise to 3% from April 2019.
Currently, employees must put in 3%, which will rise to 5% from April 2019.
After an employee has joined a pension scheme through auto-enrolment, employers need to provide them with certain information.
This includes letting them know they have been automatically enrolled, what this means, and informing them of their right to opt out or back in to the scheme.
Any employees who have opted out of an auto-enrolment scheme must be automatically re-enrolled on a regular basis, usually every three years.
Employers also need to re-declare their compliance with auto-enrolment.
Employers need to keep records to show they have complied with their legal auto-enrolment obligations. These include:
- Employee information, such as their personal details, national insurance number, gross qualifying earnings, auto-enrolment date and opt-in or opt-out notices.
- Pension scheme information, including pension scheme reference, scheme name and address.
How could auto-enrolment change in the future?
A report published by the Department for Work and Pensions (DWP) in 2017 suggested lowering the minimum age from 22 to 18, which would bring an additional 900,000 young people into auto-enrolment.
The same report recognised the need to find a pension saving solution for the 4.8 million self-employed people in the UK who are not included under auto-enrolment. The DWP plans to look at different options to solve this before implementing any changes.
It’s also possible that minimum contributions could be further increased after 2019/2020, to encourage savers to contribute more than 8%, but the Government has said it will assess the impact of the contribution increases first.
We’re here to help you
To discuss auto-enrolment or any other payroll related issues please do not hesitate to get in touch.