Workplace pensions

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Under the Pensions Act 2008, every employer in the UK must put certain staff into a pension scheme and contribute towards it. The pension is called a ‘workplace pension’, and the process by which you put eligible staff into the scheme is called ‘automatic enrolment’.

Yes: if you employ at least one person, either full-time, part-time or on a casual basis, provided that:

• They earn over £10,000 per annum.
• They are aged between 22 and the state pension age.

The usual determinant of whether you have staff is whether you decide the work that the person does, tell them how they are to do it, provide the equipment, pay them for the hours that they undertake the work (rather than a fixed price for the work) and the person is entitled to benefits such as holiday pay or sick pay.

Maybe: if you employ someone outside the criteria above and they ask to join a Workplace Pension Scheme.

No: if you have no staff.

Note: if you have staff who are not eligible, you still have other tasks to carry out in order to meet your legal duties, including writing to these staff to tell them how automatic enrolment applies to them.

1. Choose a pension scheme

Your first task is to choose the pension scheme that you will use to provide your workplace pension. If you have an existing pension scheme, you can use this or you can seek advice from a pension advisor. Alternatively, you can use the National Employment Savings Trust (NEST), which is a pension scheme provider that has been set up by the Government and must accept all employers that apply to use it for automatic enrolment.

2. Determine who to include in the pension scheme

You are required to determine who to include in the pension scheme and to supply information on these employees to your pension provider.

You must include any of your staff who are aged between 22 and the state pension age, earn over £10,000 per year (or £833 per month or £192 per week), and who are not already enrolled in a company pension scheme. Employees who fall outside this requirement only need to be included if they specifically ask to be included.

3. Write to inform your staff

Within six weeks of your workplace pension starting, you must write to all of your staff individually and tell them how the workplace pension applies to them. That means writing to those who have been enrolled to tell them that they are in the pension scheme, and to those who have not been enrolled to explain why, as well as let them know that they can be enrolled if they request to be included.

4. Declaration of compliance

Finally, within five months of setting up your Workplace Pension Scheme, you must complete the online Declaration of compliance to confirm that you have met your legal duties.

Note: even if you do not have any employees, you still need to complete the declaration to confirm that your business has complied with the legislation.

While there is no maximum level for contributions to a Workplace Pension Scheme, the Government has introduced a minimum contribution level. The minimum employee contribution is 5%, and the minimum employer contribution is 3%, making the total minimum contribution 8%.

Every three years, you must put certain staff back into a pension scheme. This is called ‘re-enrolment’. Your re-enrolment duties must be carried out approximately three years after your automatic enrolment staging date. Your duties will vary depending on whether you identify that you have staff to re-enrol, or whether you have no staff to re-enrol. Either way, you will need to complete another Declaration of compliance.

As with setting up a workplace pension, re-enrolment is a four-step process:

1. Choose your re-enrolment date

First, you need to choose your re-enrolment date from within a six-month window, which starts three months before the third anniversary of your automatic enrolment staging date and ends three months after it.

2. Assess your staff

On your chosen re-enrolment date, you’ll need to assess certain staff to determine whether you need to put them back into your pension scheme.

3. Write to the staff you have re-enrolled

You then need to write to staff to tell them that you have put them back into a pension scheme.

4. Complete a re-declaration of compliance

You must again complete an online declaration stating that you have complied with the legislation by undertaking re-enrolment.

Re-enrolment tool

The Pensions Regulator has a free re-enrolment tool to help you to meet your re-enrolment date.

Monitor the ages and earnings of your staff

You must monitor your employees’ ages and pay. If any staff reach the criteria of being aged 22 and earning over £10,000 per annum, you must put them into a pension scheme and write to them within six weeks from the day they meet the age or earnings criteria.

Manage requests to join or leave your scheme

If an employee writes to you asking to join your scheme, you must put them into it within a month of receiving their request.

You will have to pay into the pension scheme if they are:

• Aged 16-74, and;
  
   
• Earn at least £520 a month or £120 per week.

To find out how much you will need to pay, you should ask your pension scheme provider.

Employees can choose to leave the pension scheme. If they ask to leave within one month of being put into a scheme, this is known as ‘opting out’. Many pension providers will manage the opt-out process on your behalf. If an employee opts out, you need to stop taking money out of their pay and arrange a full refund of what has been paid to-date. This must happen within one month of their request.

For more information on your ongoing duties with regards to workplace pensions, visit the Pensions Regulator website.