From 1^st October 2012 companies are having to automatically enrol all eligible workers in a qualifying pension scheme and boost each worker’s contributions with contributions of your own.

Workers eligible for automatic enrolment will be those who aren’t already in a qualifying pension scheme and

• Aged between 22 years and State Pension retirement age and earning over £10,000 (2019/20) a year and working in Great Britain.
• The qualifying scheme may be your own existing or new Group Personal Pension Scheme, if it meets certain criteria or the governments new National Employment Savings Trust. Other options could be Peoples Pension or Now Pension. You may also want to consider using a combination of the options depending on your requirements.

Minimum contributions:

• Employee minimum 4%
• Tax relief 1%
• Employer minimum 3%
• Total minimum 8%

Qualifying schemes:

While eligible workers can opt out, for those choosing to contribute their 4% plus 1 % tax relief, you will have to contribute at least 3% of their ‘qualifying’ earnings (basic salary plus commissions, bonuses and overtime between £6,136 and £50,000 a year (2019/20). This will apply immediately to all new eligible workers and those not currently in a qualifying scheme.

Workers between ages 16 and 21 or over state pension age but under 75 won’t be automatically enrolled, but can ask to be enrolled. Low-earning workers can also ask you to arrange a pension for them, but in that case you won’t have to pay in and the pension scheme doesn’t have to be a qualifying one.

Qualifying earnings

• Earnings within the band between £6,136 (Lower Earnings Limit) and £50,000 (2019/20)
• Earnings to be taken into account include salary, wages, commission, bonuses and overtime; statutory sick pay, statutory maternity, paternity and adoption pay.
• The minimum requirements are contributions of 8% of qualifying earnings (inclusive of at least a 3% employer contribution)

Note:

Eligible Job Holders

They are called this because they are ‘eligible’ for automatic enrolment.

Non Eligible Job Holders

They are called this because they are not eligible for automatic enrolment but can choose to opt in to a pension scheme and benefit from an employer contribution

Entitled worker

They are called this because they are ‘entitled’ to join a pension scheme; the employer does not have to make any contribution. 

If a worker opts out or stops paying into the workplace pension their employer has a duty to automatically enrol them back into their pension scheme at regular intervals, usually every three years

Employer Alternative Options to Qualifying Earnings

The alternative quality requirement requires a qualifying work place pension scheme to satisfy one of the following three requirements, referred to in the guidance as tiers, for all of the relevant jobholders.

Tier 1              Total contributions of at least 9% of the jobholder’s pensionable earnings (including an employer contribution of at least 4%) for each relevant jobholder in the scheme. The pensionable earnings of the jobholder must be equal to or more than that jobholder’s basic pay.

Tier 2              Total contributions of at least 8% of the jobholder’s pensionable earnings (including an employer contribution of at least 3%) for each relevant jobholder in the scheme, provided that the total pensionable earnings of all relevant jobholders (taken in aggregate) to whom this tier applies constitutes at least 85% of their total earnings. The pensionable earnings of the jobholder must be equal to or more than that jobholder’s basic pay.

Tier 3              Total contributions of at least 7% of the jobholder’s total earnings (including an employer contribution of at least 3%) for each relevant jobholder in the scheme. All earnings must be pensionable.

You may also want to look into the option of postponing auto enrolling your employees date by up to 3 months. This does not postpone your staging date.

Considerations

It is essential to analyse your work force and establish what type of workplace pension or pension schemes you are looking to offer your employees and what the costs are to your business.

A no cost automatic enrolment report is available and the following data will be required on a excel spreadsheet:

1. Employer PAYE reference number
2. Dates of birth all employees
3. Breakdown of weekly and monthly paid staff
4. Basic salary
5. P60 earnings
6. Contribution basis for all employees to any existing  pension scheme 

This will enable Radcliffe & Co to inform you of your staging date, breakdown of staff eligibility and employer costs.

Radcliffe & Co can then guide you through the options available to you if want to use our expertise and services or look at employer alternative workplace schemes.

Other options include Salary Exchange or offering your staff access to Independent Financial Advice initially and on an ongoing basis.

Employer Auto-enrolment Advisory Service

This will satisfy your requirements under the legislation and ensure that you are fully compliant. Set up fees £250 per employee subject to £1,500 min, ongoing service fee £100 per employee per annum paid quarterly in arrears. Fees are plus VAT.

• Advice on Employer duties and options under Auto Enrolment
• Initial workforce assessment report
• Identify appropriate scheme for Auto Enrolment compliance
• Negotiate scheme acceptance with provider
• Advise on appropriate default investment fund
• Staff presentation
• Implementation of your new scheme
• Face to face independent financial advice for employees
• Salary exchange options
• Investment advice for employees
• Review of existing pension plans
• Ongoing advice for employer and employee