What is Auto Enrolment?
Pension Auto Enrolment means that all employers must enrol their employees in a workplace pension scheme. The scheme has been gradually phased in, but by February 2018 every employer, and that means even those employing one person, will have to have an auto enrolment scheme in place. The way the system works is that both the employer and employee must contribute at least 1% of the employee’s earnings into a pension scheme.
Is everyone eligible to be auto-enrolled?
Any worker aged at least 22 and not yet at state pension age, who is earning a salary of at least £10,000 and working in the UK, is eligible.
Do all eligible employees have to accept auto-enrolment?
No, employees can opt out - but it’s not easy. For one thing, before an employee can opt out, they must have been enrolled and they must have been given all the pension enrolment information by their employer. It is important that every worker has been provided with sufficient information to allow them to make an informed choice about whether they really do want to opt out. This information can’t be given verbally, it has to involve the proper paperwork and be formally presented.
Does every employer have to offer auto enrolment?
Yes! As an employer you will receive written notices from The Pensions Regulator regarding your requirement to implement auto enrolment – the timing for this to happen is known as your ‘Staging Date’.
Ignore these notices at your peril!
If an employer chooses to ignore these notices and does not set up an appropriate scheme by the required staging date, then The Pensions Regulator has the power to fine the employer for non-compliance. This is not just scaremongering, one of our clients has just been fined £10,000 by The Pensions Regulator, so it is very real.
Make sure that the pension Regulators correspondence is sent to you
Note that if your trading address is registered with the HMRC and The Pensions Regulator at your accountant’s office, then they will receive the correspondence from The Pensions Regulator. If they ignore it then it could cause you a lot of trouble. So, if this is the case then contact your accountant to make sure that they are forwarding the relevant correspondence to you.
What can you do to prepare for auto enrolment?
A good place to start is the guide provided by The Pensions Regulator:
If you need further help you should speak to you accountant, payroll provider or IFA.
Whatever you do, don’t do nothing!