Auto enrolment advice and integration from Select Investment Managers
As part of the Government’s attempts to ensure a prosperous future for the UK’s growing and ageing population, the Pensions Act 2008 has been introduced. This confers certain duties on employers, who must by law create a workplace pension scheme and then contribute to any policies on behalf of employees who are paid via a PAYE scheme.
This is called Automatic Enrolment, because there should be no responsibilities from the employees’ perspective in terms of having to apply or register. Instead, the onus is entirely on employers, and even companies with existing workplace pension schemes must check that their current plans are suitable. A point of contact has to be nominated, and each company will have been provided with a staging date when automatic enrolment duties come into effect. In an attempt to simplify matters, a trust-based savings scheme called NEST has been established that will ensure companies of any size can meet their automatic enrolment responsibilities.
It’s estimated that automatic enrolment can take up to a year to prepare for, and many employers are uncertain of where to start. The team at Select Investment Managers have therefore dedicated time to studying these new regulations, and are in a position to offer honest and practical advice about how to establish a suitable scheme and enrol staff. Our experts can also ensure that the correct balance is struck between employee salary contributions, employer contributions and Government tax relief.
Useful advice about workplace pensions
All firms that existed when the initiative started will have enrolled their staff by April 2017, followed by all new employers by February 2018. The level of pension contributions will be phased in over time to help employers and individuals adjust. Full contribution levels will have to be paid from 1 October 2018.
There is a minimum contribution level that will be incrementally phased in by October 2018. By this point, an employer must contribute at least 3% of a worker’s qualifying earnings. This figure is calculated by assessing the level of each employee’s remuneration that falls within the thresholds announced annually by the Department for Work and Pensions. It must include salary, overtime and any bonuses/commissions, as well as statutory sick/adoption/maternity/paternity pay that. Employees must contribute 4% and a further 1% is provided through tax relief.
It’s important to note that if a company has no staff – other than a sole director or a group of directors of whom only one has an employment contract – then the workplace pension scheme doesn’t apply. Opting out of this requires a letter or email of notification to be sent to The Pensions Regulator, listing basic company information like its Companies House number and employer’s PAYE reference. If circumstances change and employees are recruited (even other directors working under contracts of employment), the regulator must be informed as soon as possible.
Workers under the age of 16 and over the age of 75 are exempted from the scheme, as are people who do not ordinarily work in this country. Armed Forces personnel are also exempt, along with the self-employed and people earning less than £10,000 per year. Once enrolled, employees may also choose not to participate by completing an opt-out notice from the pension scheme provider and supplying it to their employer however, they will be automatically re-enrolled at a later date.