As an employer in the UK, it’s crucial to understand your obligations when it comes to providing a workplace pension scheme for your employees.
In 2012, the government implemented a system called “auto-enrolment” which aims to encourage employees to save for retirement and ensure they have access to a pension plan without them having to set one up themselves.
The robinson+co payroll team have years of experience with auto-enrolment. Here are some important features of auto-enrolment that you need to consider as an employer.
What is Auto-Enrolment?
The auto-enrolment scheme was created in a bid to address the issue of inadequate pension savings among UK workers.
Employers must automatically enrol eligible employees into a workplace pension scheme and make contributions on their behalf. This ensures that employees have the opportunity to save for their retirement, promoting financial security in later years.
Eligibility of Employees
Under auto-enrolment, eligible employees must be automatically enrolled in a workplace pension scheme when they join the business. An eligible employee is someone who:
- Is aged between 22 and below the state retirement age
- Earns over a certain threshold (currently £10,000 per year) – £833 per month or £192.00 per week
- Works in the UK
Your Responsibilities as an Employer
You have several responsibilities as an employer that fall under auto-enrolment, including:
- Assessing your workforce to determine who is eligible for auto-enrolment.
- Setting up a qualifying workplace pension scheme.
- Automatically enrolling eligible employees into the pension scheme and providing them with written information about their membership.
- Making regular pension contributions on behalf of eligible employees.
- Keeping accurate records and maintaining compliance with reporting requirements.
Opting Out and Employee Contributions
Employees may not necessarily want to have a pension with your provider, which is why it is important that all employees eligible for auto-enrolment are offered the option to opt out of the scheme. However, it’s important to note that you cannot encourage employees to opt out.
Pension contributions are made by both the employee and the employer, with minimum contribution levels set by the government. These contribution levels are subject to increases and for the fiscal year 2023/24, a qualifying pension scheme requires a minimum of 8% total contributions, 3% of which must originate from the employer. This takes into account tax relief, based on relevant earnings.
Penalties for Non-Compliance
Non-compliance can include actions such as not enrolling eligible employees, failing to make the required contributions, or not fulfilling the necessary reporting and administrative requirements as stipulated by the relevant pension regulators.
If an employer is found to be non-compliant, it can result in penalties, fines, and legal consequences for them.
In order to remain compliant and ensure that your pensions and auto-enrolment systems are set up and operating correctly, it’s always best to seek the help of pension professionals. Here at robinson+co, our payroll team have a wealth of experience in pension support, across a wide variety of sectors.
If you’re looking for help and advice with your pension scheme, call our team today on 01900 603623 and we will be happy to help.