Auto enrolment and work place pensions

Automatic enrolment is a Government initiative to help employees contribute to a pension scheme at work. Automatic enrolment means that all employers will need to enrol all eligible employees into a workplace pension scheme.

Auto enrolment applies to all employees in the UK if they meet the following criteria :

• Work, or ordinarily work, in the UK
• Aged between 22 and State pension age
• Earn above the earnings threshold (currently £10,000)

Automatic enrolment makes it compulsory for employers to automatically enrol their eligible workers into a pension scheme.

Once an employee is enrolled they have a 30 day opt out period in which they may choose to opt out and get a full refund. If employees wish to leave the scheme after the opt-out period, they can cease active membership. It is illegal for an employer to tell an employee to opt out.

The minimum contribution, which is currently 3% for employers and 5% for employees.

As part of the ongoing process, aside from making the monthly deductions and process the monthly pension payments. Employers are also responsible for managing opt in and opt out requests, monitoring new and existing employees, keeping records up to date and re-assessing employees every three years.

Every three years, you’ll need to re-enrol workers who are eligible for Automatic Enrolment but aren’t in a qualifying scheme. This includes workers who have previously:

• stopped making contributions, or 
• opted out, without having opted back into the scheme. 

An eligible jobholder is a worker who is aged at least 22 and under State Pension age and is earning more than the current tax year threshold. The process of re-enrolment is the same as it was for Automatic Enrolment. Once the assessment for re-enrolment has been completed and any eligible jobholders have been identified, they will need to be enrolled into a scheme as a normal new employee.  

Even if you do not have any staff members to put back into the scheme you must complete the re-declaration of compliance to let the Pension Regulator know that you have met your duties. This is a legal obligation and if you do not complete this the company could be fined. 

Your employee can opt out of the scheme within one month of being automatically re-enrolled, they will be treated as if they had never joined the scheme, and any money that they have paid into the scheme will be refunded in full.

You should look at different schemes before you decide which is suitable for you and your staff.  The following are some examples of schemes open to small employers: 

• The BlueSky Pension Scheme
• National Employment Savings Trust (NEST)
• NOW: Pensions
• The People’s Pension
• Smart pensions 

There are a number of things you should check before you choose a pension scheme. This includes whether it will accept all your staff, how much it will cost, whether it uses the best tax relief method for your staff and whether it will work with your payroll. 

An employer may postpone enrolling employees for a maximum of three months. This gives both the employer and employee chance to ensure both happy with the new role.

Employers are required to continue automatically enrolling eligible workers who’ve opted out, every three years. They are also required to complete a re-declaration of compliance every three years for the pension regulator to guarantee their compliance. If employees opted out three years ago and are still eligible jobholders, they must be re enrolled into an auto enrolment pension scheme.