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Workplace Pensions - Five Key Facts

The more we talk to UK businesses, it’s clear that Auto-Enrolment workplace pensions have become a looming issue, particularly for small and medium sized businesses. Our Five Key Facts aim to answer the core questions surrounding this new Government legislation.

 

What is Auto-Enrolment?

Over the next couple of years every employer will be obliged to enrol workers into a workplace pension scheme. This means any business with employees has to actively offer a pension to its staff or face stringent fines. Even if you have just one employee - providing they work in the UK, are aged between 22 and the state pension age and are earning more than £10,000 a year - these rules apply to you. Employers must make contributions for qualifying workers and in turn, the government will provide tax relief on contributions. Employees between the age of 16 and 74 who earn between £5,772 and £10,000 a year also have the option to ‘opt in’ and even those earning less than £5,772 have the right to join.

New rules and their consequences

  • Many business across the UK are failing to hit government deadlines and this is expected to cost SMEs thousands of pounds.
  • SMEs are missing initial designated deadlines and although three month extensions can be granted, ever increasing demand is putting pressure on providers.
  • Pension providers are already choosing to close off applications from new members, causing a capacity crunch.

What are the deadlines?

Every employer has a different deadline to fulfil known as their ‘staging date’ and this depends on the size of the business. The deadlines for the largest employers has already passed. Businesses with less than 89 employees due to stage right now. Firms with fewer than 50 employees will have to comply between June 2015 and April 2017. The staging date depends on the final two characters in any business’s PAYE reference. Businesses without a PAYE scheme will have to comply by 01 April 2017.

What’s next?

As an employer, you need to:
  • Provide a qualifying workplace pension scheme.
  • Register with and provide details of the scheme to The Pensions Regulator.
  • Automatically enrol all qualifying workers into the scheme.
  • Make contributions into the scheme for all qualifying workers.
  • Provide detailed and relevant information to all qualifying workers.

What will it cost the Employer?

The minimum employer contributions are set to be gradually phased in between now and October 2018.

Start date – Sept ’17   

From the commencement of the scheme until September 2017, a minimum contribution of 2% of employee earnings must be made, with the employer being responsible for contributing at least 1%.

Oct ’17 - Sept ’17                   

From October 2017 to September 2018 the minimum contribution rises to 5% of which the employer must contribute at least 2%.

Oct ’18 onwards 

After October 2018 minimum contributions of 8% must be made, of which the employer must contribute at least 3%.

Employers can work out their relevant minimum contributions using The Pensions Regulator’s Auto-Enrolment tool. Larger businesses may choose to operate their own pension scheme. SMEs can choose to outsource their scheme to a private facilitator like The EB Partnership who aim to reduce the overall cost and time involved.
 
Should you want independent advice on planning your Auto-Enrolment workplace pension scheme, call The EB Partnership on 020 7015 2142 or email us at: enquiries@theebpartnership.co.uk

Neil Morrow
About the Author

Neil Morrow

Neil is a Partner of The EB Partnership, an independent employee benefits consultancy who provide expert advice on financial planning for businesses and their employees on areas such as pension Auto-enrolment, group risk insurance, healthcare and employee benefit communication.

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