Auto Enrolment And Workplace Pension Reform – Overview
Update from Patrick Hamilton, Tax Director at DonnellyBentley
Within the next three years all employers will have to comply with the requirement to enrol certain employees into a pension scheme and make employer contributions. The date when the legal obligations take effect, known as the ‘staging date’ may appear to be some way off but time is needed to prepare and put into place the arrangements for compliance. There will be some additional costs to budget for which are dependent on the age and pay levels of your employees.
Your staging date can be found by entering your PAYE reference into the tool on the Pension Regulators website. Other guidance is also available there however, here at DonellyBentley we are able to advise you on every stage of preparation and on-going compliance with the legislation
A Multi-Stage Process
1) Find your staging date
We can advise you of your staging date based on your PAYE reference.
2) Assess your workforce for eligibility
Your workers will fall into one of three categories based on their age and pay levels and your obligations depend on which category they are in (eligible jobholder, non-eligible jobholder and entitled worker). We can advise you what category your employees fall into based on payroll data (date of birth and pay) and how much you will have to contribute to their pensions using our payroll software. Your own software may also have the ability to do this.
3) Review you current pension arrangements
If you already contribute into a pension scheme for your employees you will need to know if the scheme qualifies for auto-enrolment. We can review scheme documentation and liaise with the pension provider to answer this question and advise if a new scheme is necessary.
4) Communicating with employees
Certain information needs to be provided to employees depending on their category to explain their options. Standard letters and help are available on the Pension Regulators website. We can assist with preparing the right letters for your workforce.
5) Automatically enrolling workers and managing opt-in and opt-outs
You will need to take all the steps required for your ‘eligible job-holders’ and ‘non-eligible job holders’ and ‘entitled workers’ who opt in to become members of a qualifying scheme and deduct and pay over contributions from the first payroll payments after the staging date. Documentation and procedures will have to be right where employees opt-out. We can calculate the pension deductions and employer contributions due and help you communicate with the employees and pension provider and maintain the necessary records.
6) Registering with the Pensions Regulator
When your staging date has passed you have to register with the Pensions Regulator, the body which is charged with the responsibility of policing employers compliance. We can deal with this as your agent.
7) Calculating and paying over deductions and contributions
Employer and employee contributions of least the minimum amount are required to be calculated deducted and paid to the pension provider within the statutory timeframe. We can perform the calculations going forward as part of the payroll process and deal with the administration of payments to the pension provider.
8) Ongoing compliance
As employees join your firm, have birthdays or pass pay thresholds your obligations as an employer change and there may be an obligation to auto enrol and communicate with employees. We can alert you to the changes using our payroll software and if requested deal with the consequent administration.
Use of the option for limited postponement of the staging date and ‘certification’ (where pensionable earnings under scheme rules are different from qualifying earnings under the legislation) can be used to simplify the process of compliance and we can advise on these matters as well.
As you can see, there is quite a bit of preparation required. To help our clients we are planning to hold a series of short seminars at our offices to provide an overview of the subject in the coming months.