What you need to know about Pension Auto Enrolment
Why Auto Enrolment?
The private pension funding had poor reception from employees because it required the employees to opt into the pension scheme themselves, and there was no obligation for the employers to make contributions. The new Auto Enrolment regulation requires the employers to make provisions for a pension scheme for their employees, automatically enrol every qualifying employee into the scheme and make a mandatory contribution too. The law applies to every single employer in the country, even as small as a single employee business.
Employers must ensure that they comply with the rules latest by the “staging date” assigned by the Pension Regulator. Staging date is the date from which your auto-enrolment duties come into effect for you.
It is important that you know your staging date and make preparations in advance. You can find your staging date using your PAYE reference from the pension regulator’s web page.
Who should be enrolled?
You need to enrol the following workers:
- Aged 22 or older and younger than the normal state pension age
- Earning reaches the “earning trigger” limit for automatic enrolment, £10,000 annual for 2015-16
- Employed in the UK.
From the time of their staging date, employers have the following responsibilities with respect to the workplace pension scheme to perform at each pay period:
- Assess all employees’ age and earning at each pay period and auto-enrol those who qualify.
- Send communication to the auto-enrolled employees on the scheme details and the option to opt-out
- Send communication to the employees who do not qualify giving them an option to “opt-in”
- Process opt-in and Opt-out requests
- Keep an activity log of all assessments, communications, opt-in and Opt-out processes and contributions
- Update the Pension Provider’s system by uploading your payroll and assessment data
- Remit the contributions to the pension provider
- Until September 30th, 2017, employers must contribute a minimum of 1% of their employee’s salary every time their employee is paid. The employees make a minimum contribution of 0.8% towards their pension scheme.
Pension Regulations will take enforcement actions on employers who do not comply with can include the following:
(a) Informal action
Guidance will be issued in the form of an email, letter or on the telephone or in person. It will detail the breach, and you will get a time frame within which you must comply with your responsibilities.
(b) Statutory Notices
Through a statutory notice, employers will be informed of any unpaid contributions or failure of carrying out your responsibilities. Interest may be payable on unpaid contributions.
(c) Penalty Notices
When the breach is not rectified within the given time frame, a fixed penalty notice will be issued to the employer for £400.An escalating penalty notice is issued in the event of failure of the statutory notice. Depending on the number of staffs you have, the penalty can vary from a daily rate of £50 to £10,000. Failure of paying the contributions can lead to the issuance of a civil penalty where the penalty is £5000 for individuals and £50,000 for organizations.
If you receive a penalty notice, you should act quickly and make sure that you are compliant, and the contributions are paid within the specified time.