Auto Enrolment – Your Questions Answered

Auto Enrolment is the new government initiative designed to help people save for their retirement. This means that if you’re an employer you must enrol your eligible employees into a pension scheme and contribute towards it.

Here we answer some of the most frequently asked questions about Auto Enrolment by employers:

What is my staging date?

Your staging date is set by law and is the date that an employer’s automatic enrolment duties commence.  You can find out when your staging date is here: http://www.thepensionsregulator.gov.uk/employers/staging-date.aspx

Do all of my staff have to be automatically enrolled?

Not necessarily, you will need to see which of three classifications each staff member falls into:

  1. Eligible jobholders: ‘eligible’ for automatic enrolment
  2. Non-eligible jobholders: not eligible for automatic enrolment but they can choose to opt in to a pension scheme
  3. Entitled Workers: ‘entitled’ to join a pension scheme

The table below shows how to assess staff based on their ages and how much they earn:

Monthly gross earnings Age Weekly gross earnings
From 16 to 21 From 22 to SPA* From SPA to 74
£486 and below Has a right to join a pension scheme 1 £112 and below
Over £486 up to £833 Has a right to opt in 2 Over £112 up to £192
Over £833 Has a right to opt in Must be enrolled 3 Has a right to opt in Over £192

Figures correct as of 2015/2016. *SPA = state pension age

1 Has a right to join a pension scheme – If they ask, the employer must provide a pension scheme for them, but the employer does not have to pay contributions into a pension scheme.

2 Has a right to opt in – If they ask to be put into a pension scheme, the employer must put them in a pension scheme that can be used for automatic enrolment and pay regular contributions.

3 Must be enrolled – The employer must put these members of staff into a pension scheme that can be used for automatic enrolment and pay regular contributions. The employer does not need to ask their permission.

The assessment must be carried out each time the payroll is processed to see if there have been any changes.

Do my staff have to stay in the pension scheme once I’ve auto-enrolled them?

No – they have the option to opt-out if they wish.  In order to do so the employee must notify the pension provider who will then let you know that they have opted out.

If they opt out within one month they will be treated as if they never joined the scheme and any contributions made will be refunded in full.

Who pays what?

Under auto enrolment there are minimum contributions you must pay, which are shown in the table below.

Minimum contributions are being introduced gradually over time. You will usually pay pension scheme contributions either as a fixed amount or based on a percentage of qualifying earnings.

Date Employer minimum contribution Total minimum contribution
Employer’s staging date to *05/04/18 1% 2% (including 1% staff contribution)
*06/04/18 — *05/04/19 2% 5% (including 3% staff contribution)
*06/04/19 onwards 3% 8% (including 5% staff contribution)

*The proposed dates are subject to Parliament approval

What about Tax Relief?

The employer contributions that you make into your employees’ pensions are an allowable deduction in your business accounts.

Your employee’s contributions will be made up of their contribution plus an amount put in by the government, so of the 1% staff contribution due up to 5 April 2018 the employee will contribute 0.8% & the other 0.2% will be put into the pension fund by the government.  If the employee is a higher rate or additional rate tax-payer they will be able to claim additional relief via their tax return or PAYE code.

 

What happens if I miss my staging date?

If you miss your staging date, then you need to act fast as you will be subject to an initial penalty and then daily fines, which can be quite substantial (see next Q&A).

 

What penalties are there for non-compliance?

There will be a fixed penalty of £400 and daily fines anywhere from £50 a day to £10,000 a day depending on the number of employees at the business.

Number of employees Daily rate of Escalating Penalty (£)
1-4 50
5-49 500
50-249 2,500
250-499 5,000
500 or more 10,000

 

What effect does this have on apprentices?

Every employee earning more than £10,000 per year must be automatically enrolled in an occupational pension scheme, including apprentices.

 

Does my business have to do it?

If you are an employer with staff working for you in the UK then yes, you have to do it.

 

“Auto Enrolment is something no employer can afford to ignore. Even if your enrolment date isn’t imminent, rather than leave it too late and risk fines, get the information now to help you make informed and cost-effective decisions. It is recommended that preparations for Auto Enrolment start at least 12 months before your staging date.” Hari Mehta, Mitchells Auto Enrolment Specialist.

If you do have any further questions about Auto Enrolment or would like to find out more about how Mitchells can help your business with its Auto Enrolment responsibilities, get in touch with our expert team today by emailing lizfisher@mitchellsaccountants.co.uk