Automatic Enrolment is new government legislation which means that all employers must enrol their workforce into a workplace pension scheme. Is your business ready for its arrival? Does your pension scheme fit the requirements? Do you know how it needs to be administered to make it compliant and avoid potential fines? Download this auto enrolment summary guide to help to get you started.
Auto Enrolment Frequently Asked Questions
What are the benefits of auto enrolment pensions for employees?
For those without any existing pension arrangements automatic enrolment delivers a simple way to get started. Your employer decides on an appropriate pension scheme, takes on the vast majority of the administration, enrols you into the scheme and deducts your contributions automatically via payroll. Auto enrolment makes it more attractive to enrol in a pension as your employer must make a ongoing contribution to your fund.
If you already pay into a personal pension the choice is not so straightforward. With an auto enrolment scheme you have the benefit of your employer’s contributions but only if you do not opt out and make your own contribution. However, depending on the terms of your personal pension it may be best to allocate any extra contributions to that scheme rather than opt for the auto enrolment scheme. It may be wise to seek out Independent Financial Advice to aid your decision making process.
Who qualifies for auto enrolment?
Employees fall into three categories depending on age range and salary bracket, those who must be enrolled, those with a right to opt in and those with a right to join.
Must be enrolled – Any employee earning over £833 per month aged between 22 and state pension age.
Right to Opt in – An employee aged between 16 and 74 years of age and earning between £487 and £833 per month has a right to opt in and their employer must make contributions on their behalf.
Right to join – An employee who ask to join the auto enrolment scheme must be enrolled but the employer has no obligation to make contributions. Any employee aged between 16 and 74 years of age and earning £486 / month or less has a right to join.
- figures correct at December 2015.
How do I opt out of a auto enrolment pension scheme?
Your employer has to fulfil certain statutory obligations so it is only possible to opt out after you have been enrolled and received all relevant enrolment documentation from your pension provider. You may only opt out during the specified opt out period. The start date of the opt out period depends on when your employer fulfils their obligations; you have one month from this date.
As a safeguard the documentation you require to opt out must come from the pension scheme provider. You must complete this documentation and send it to the pension provider, they will remove you from the scheme and inform your employer. The documentation provided by the pension provider should give clear guidance on the process you must follow to opt out.
Remember, if you opt out you will lose your employer’s contribution to your pension, as well as the government’s contribution in the form of tax relief.
I opted out of Auto enrolment can I opt back in?
You can ask to opt back in and in most cases your request will be granted although your employer is under no obligation to do so immediately. If you opt out your employer will automatically re-enrol you 3 years later at which point you will need to opt out again if you so wish.
What is a auto enrolment staging date?
As an employer your staging date is the date your automatic enrolment duties come into effect. Staging dates are staggered according to the size of the work force. Larger firms had the earliest staging dates while micro businesses will have the later staging dates (into 2017).
It is important to not leave your preparation for Auto enrolment until just before your staging date as there is a lot to put in place including Payroll, the choice of an appropriate pension scheme, employee communications and documentation.
Failure to meet the requirements by the staging date could trigger a fine.
What payroll software is best for auto enrolment.
Payroll software can save a significant amount of auto enrolment time and effort. If the right software is in place a number of tasks can be performed automatically and it can be relatively easy to establish who should be enrolled in the pension scheme and on what terms.
There are many Payroll software products on the market. Some of the most popular appear to be SAGE 50 (desktop), SAGE One (Online), Moneysoft, and BrightPay but there are many more. However, to save the time involved in learning a new software package and integrating it with existing systems it is always best to test the capabilities of existing payroll software first, or establish if a bolt on auto enrolment module is available. Whatever software is chosen it must be capable of handling all auto enrolment payroll issues
What pension scheme is best for Auto enrolment
With so many alternative schemes available it is impossible to give an answer to cover all situations. The choice depends on the business, its circumstances, what is best for employees and the costs to the business.