You might have heard the ads on the radio or you have heard people talk about auto enrolment and workplace pensions. So, what’s it all about and does it apply to you? In this week’s blog post, we’ll cover the basics and answer the most commonly asked questions.
How does auto enrolment work?
Automatic enrolment is a government initiative to help more people save for later life through a pension scheme at work. If an employee is aged between 22 years and pension age and earns more than £10,000 per year (or £833 monthly or £192 weekly) and works in the UK, they have to be auto-enrolled into a suitable pension scheme by their employer. If they fall outside any of these boundaries, they can choose to opt into a workplace pension.
Once enrolled, a small percentage of the employee’s salary is deducted and put towards the pension. The employer will also make contributions to the employee’s pension. Until 5th April 2019, the employee contributes 3 percent minimum, the employer pays 2 percent making up a minimum total contribution of 5 percent of the employee’s salary. After that date, the total contribution rises to 8 percent, of which the employer pays a minimum of 3 percent.
Employees have the opportunity to opt out of the employer’s pension scheme if they wish, but they must not be influenced to do so. This happens with a written form. Every 3 years, these employees will be re-enrolled. If they still wish to opt out, they have to do so again with another form.
Should employers not comply with auto enrolment, the Pension’s Regulator can impose fines that start at a £400 fixed penalty notice and can lead to an escalating penalty notice ranging from £50 to £10,000 daily depending on the number of employees within the company.
Frequently Asked Questions
I am self-employed. Do I need to auto-enrol myself?
No. If you’re self employed you do not need to auto-enrol into a workplace pension. Simply make sure that you plan for your financial future.
I am the only employee and sole director of my Limited Company. Does auto-enrolment apply to me?
No. You are one of the few classes of workers that is exempt from auto enrolment. You can, however, opt into a workplace pension scheme if you so choose.
I am on a zero hours contract. Will I be auto-enrolled?
That depends on your age and how much you earn. If you earn above the £192 per week threshold (or £833 monthly or £10,000 annually) and are of eligible age you will be auto enrolled unless you choose to opt out.
Do I have to set up a pension scheme if none of my employees are in the eligible category?
The answer is no, as long as none of the employees want to voluntarily opt in. Your employees must be written to and given the choice to do so. However, you will still need to fill out a declaration of compliance to inform the pensions regulator you have complied with automatic enrolment duties.
This is the first blog post about auto-enrolment. There will be more detailed posts about different aspects of the workplace pension in the future. We will, of course, also update you about any changes.
How Alba can help
Here at Alba we can do the bulk of all auto enrolment related administrative duties for you. If you would like to find out what we do and how we can help, please get in touch. You can email us admin@alba.uk.com or call us on 01509 853779.
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