What is auto enrolment?

Automatic enrolment occurs when an employee meets the requirements for a workplace pension scheme but doesn’t need to ask to be a part of it. Previously, workers themselves told their employers if they wanted to join schemes, but now it happens automatically.

Automatic enrolment started rolling out in 2012. The goal was to help people build up bigger pension pots by the age of 55.

Automatic Enrolment Eligibility

You must assess all staff to determine their eligibility:

• age between 22 and state pension age.
• earnings before tax are at least £10,000 per year (or £833 per month, or £192 per week).

If staff don’t meet the eligibility criteria, they don’t need to be automatically enrolled in a pension unless they ask to be put into one.You only have to pay in as an employer if an employee earns more than £120 per week/£520 per month/£6,240 per year.

Legal requirements for auto enrolment

Since the Pensions Act 2008, all employers have had to put eligible staff on pension schemes and pay into them. From the moment you employ your first member of staff the duty applies.

You must contribute at least 3% of your employees’ qualifying earnings to the staff pension scheme. You must also deduct it from staff pay every month. If you don’t pay, the government will fine you. If a member of staff does not want to be a part of a pension scheme, you can remove them at a later date.

How to set up auto enrolment for an employee

To set up and manage an auto-enrolment pension for an employee, you’ll need to:

1. Figure out which of your staff qualifies for the pension scheme.
2. Choose a qualifying pension scheme to enrol them on (by canvassing national providers).
3. Enter eligible staff into the pension scheme. Rules state that firms must enrol staff even if they want to opt out.
4. Write to staff telling them that they are on a pension scheme, including those who do not wish to have a pension within six weeks of hiring.
5. Declare compliance at the autoenrol.tpr.gov.uk portal, stating that you’ve met all your legal duties, even if you don’t have any staff.
6. Re-enrol staff that have left the pension scheme every three years, to tell the government that you have been complying.

References

1. Workplace Pensions – GOV.UK.
2. Duties for new employers – The Pensions Regulator.

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