As an employer, you need to carry out all of the actions on this page.
The Government scheme called Automatic enrolment (Auto Enrolment or AE) requires all employers to enrol eligible workers into a workplace pension scheme. Official information is given by the Pensions Regulator which provides very useful information and should be reviewed by all employers. This factsheet is intended as a minimum of information and does not describe some of the more detailed regulations and options.
Choosing a pension scheme
You will need to decide on a pension scheme provider. You could consider any of the three national schemes specifically designed for Auto Enrolment, these are NEST, NOW and People’s Pension. Of course there are many other pension providers.
We are not allowed to give advice on pensions or any other investments, only an Independent Financial Adviser (IFA) can give advice on pensions. We cannot recommend or warn against any particular pension provider. Any IFA is likely to charge a significant fee for advice and setting up a pension scheme.
Setting up a pension scheme
Once you have decided on pension scheme provider you need to set up a scheme with them. We cannot advise on which scheme to use or set up the pension scheme for you.
Remember, employers and their accountants (you or us) must NOT give employees advice on pensions. Employees that want advice must get this from the scheme providers or an IFA.
Green Accountancy can help with all of the actions on this second part of the factsheet.
Nominate a secondary contact with The Pensions Regulator
Enter your code from your Pensions Regulator here to nominate a secondary contact. This can be Green Accountancy with email address info@greenaccountancy.com. This can be done even if you have already entered a primary contact (which should always be someone at the employer).
Employee eligibility
Every employer must automatically enrol workers into a qualifying workplace pension scheme who:
- Are not already in one. If you have an existing pension scheme you much check that it is auto enrolment compliant, many schemes are not AE compliant
- Are aged between 22 and state pension age
- Earn more than £10,000 a year (more than £833 in any month). Once an employee is in your scheme they remain in the scheme, even if their salary goes below the £833 per month
- All employees must be asked if they want to join your scheme. If they earn less than £6,240 then you will not have to add to their contributions.
Eligible employees cannot opt out before joining the scheme. Employees can opt out once in the scheme, but it is vital that employers never encourage employees to opt out.
When new employees join, you may want to give them a postponement notice, to postpone their AE by up to three months. In such cases the employee can still opt to join the scheme early if they formally request to do so.
Working out your minimum contributions
The simplest and most common method of calculating minimum contributions is called “banded earnings”. Under this method:
- The minimum contribution level is based on pay between £6,240 and £50,270 per year
- Earnings above £50,270 are not subject to pension contributions
- The rate applied to the relevant earnings figure is 8% total of which at least 3% from the employer, you can contribute more if you wish
- Employees contribute 80% of their contribution, the government adds 20% within the pension scheme
Please note there are a number of other methods, for example total earnings, which are not covered here.
Communicating with your employees
You must write to all employees explain auto enrolment and their rights. This can include:
- Enrolled Letter
- Not Enrolled Letter
- Postponement Letter
If Green Accountancy prepares your payroll, we will issue these letters to your employees.
Notifying your pension scheme of your employees’ details and contributions
You will notify them each time a new employee starts with you or becomes eligible for AE. Each month all contributions will need to be notified to the pension scheme. All of this can be done by Green Accountancy.
Finally, you will need to notify Pension Regulator of your compliance by a declaration. You have to do this every 3 years.
If you would like to discuss this in more detail relating to your business, please feel free to book a free online meeting.
