Providing Workplace Pensions is simply becoming mandatory for most of the business in the UK. It is referred to as ‘auto-enrolment pensions’ and is designed to promote the way employees save for their retirement.
The Government was informed that a large number of people seem not to be saving enough for retirement, therefore, initiated a statutory saving scheme. This scheme will be compulsory for most of the firms by 2018.
Financial Conduct Authority along with The Pension Regulator is mainly responsible for administering the process and firms must have everything ready by their ‘staging date.’
At what time is Staging Date?
The Pension Regulator will communicate to you about one year before being due to the ‘stage’. Nevertheless, you can check here using your PAYE reference. Your staging date is the time you must have the entire details constantly in place for your pension scheme, after this you must make a declaration of compliance within five months of your staging date.
What is the cost?
The majority of companies will set up defined contribution schemes making the minimum cost of the pension 8% of an employee’s salary by 2018, with at least 3% contribution from the employer. The present-day contribution is 2%, with 1% from the employer, coming up to 5% starting from October 2017, with 2% from the employer, before attaining 8% in 2018.
The parts of an employee’s wage that is required to be pensionable may vary, and it can be calculated on qualifying earnings. Unless you utilize qualifying earnings you need to certify that you meet up with one of the following the criteria:
A total minimum contribution of at least 9% of pensionable pay (at least 4% of which must be the employer’s contribution), or
A total minimum contribution of at least 8% of pensionable pay (at least 3% of which must be the employer’s contribution), provided that pensionable pay constitutes at least 85% of earnings (the ratio of pensionable pay to earnings can be calculated as an average at scheme level), or
A total minimum contribution of at least 7% of earnings (at least 3% of which must be the employer’s contribution) provided that all earnings are pensionable.”
(From The Pension Regulator Detailed Guidance 4 Pension Schemes)
Some pension firms may levy a charge from the company, at the same time the administration of the scheme will also have a cost.
Choosing a Pension Scheme
You should employ a qualified scheme for auto-enrolment, and the Pension Regulator provides guidelines for choosing the suitable scheme. It is essential to get this right, and it is the duty of the employer. You can discuss with a financial advisor.
Writing to the employees
At the time auto-enrolment pensions were initially set up, the statutory communications prerequisites were intricate and cumbersome. Fortunately, they were simplified from April 2015 and at this time there are only three basic letter templates required:
- You are in the Pension
- You are not in the Pension
- You are postponed
The Pension Regulator has a handful of templates obtainable, along with complete guidance.
Automatic Enrolment of Employees
Staff members that meet specific Criteria will be automatically enrolled in an eligible pension scheme, and the minimum contributions must be made. A staff member is unable to ‘opt out’ until they are enrolled.
|Automatic Enrolment||Aged 22 – SPA, earning over £833 monthly|
|Has the Right to ‘Opt In’ to the scheme||Aged 16 -74, earning £486 – 832 monthly otherwise
Aged 16 – 21, earning over £833 monthly or
Aged SPA – 74, earning over £833 monthly
|Has the Right to join a scheme (And the employer does not have to make contributions)||Aged 16 – 74, earning below £486 monthly|
SPA = State Pension Age
In case an employee decides to ‘Opt In’, and is in the second grouping, the employer is required to make regular contributions to the scheme.
Typically, records have to be kept for a minimum of six years. You ought to keep records of all phases of the process, and ongoing records. Do not forget to keep records of letters sent to employees. The Pension Regulator also offers guidance regarding keeping of records.