The basics of Auto Enrolment
New legislation on workplace pensions will affect every employer with staff working for them in the UK. This brief guide is designed to give an overview of the new duties and spells out how Moneysoft Payroll Manager can help with the process. More detailed information including user guides for specific pension providers can be found on the Auto enrolment support section of our website.
What to do first
- Find out your 'Staging Date'
Each employer has a 'Staging Date', which is the date that the new duties come into force for that business. You can find out your staging date by entering your PAYE reference on the 'Find out your staging date?' page of The Pensions Regulator website. You will also begin receiving correspondence from The Pensions Regulator as your staging date approaches.
HOW MONEYSOFT CAN HELP: - Your PAYE reference is stored by Payroll Manager and can be found by clicking 'Employer - Employer Details - Tax Office'
- Choose a Pension Provider
When choosing a pension scheme for automatic enrolment you must make sure it meets certain criteria. You should also choose a good quality scheme that provides value for money and protects your staff’s retirement savings. There are many providers offering pension schemes suitable for auto enrolment. We would recommend that you begin the process of selecting a pension provider well in advance of your staging date.
HOW MONEYSOFT CAN HELP: - Moneysoft is NOT qualified to offer advice regarding your choice of a suitable pension scheme. The Pensions Regulator guide 'How to choose a pension scheme' is a good starting point. Alternately you may wish to employ the services of a Financial Advisor.
Then from your staging date onwards...
- Assess workers and enrol them into the pension scheme
Some employees must be 'automatically enrolled' into your chosen pension scheme at the staging date, whilst others may have the right to 'opt-in' or 'join' the scheme. Your duty with regard to each employee is determined by their age and level of earnings, and you will need to perform an 'assessment' in order to place each employee into a particular category.
* Earnings levels are for the 2015-16 tax year
Employees aged under 16 or aged 75 and over are excluded from the auto enrolment process.
'Eligible Jobholders' are those employees between 22 and State Pension Age earning the equivalent of £10,000 or more per annum. Employees in this category must be automatically enrolled into the pension scheme. The employer must pay contributions into the scheme of these employees.
'Non-eligible Jobholders' comprise of 2 groups of employee: 1). Employees aged between 22 and State Pension Age earning between £5,824 and £10,000 per annum (i.e. their earnings are below the £10,000 'trigger' for auto enrolment), and 2). Employees earning above £5,824 that are either below or above the age bracket to be automatically enrolled (i.e. they are aged 16-21 or above state pension age). Employees in this category are not automatically enrolled but have the right to 'opt-in' to the pension scheme if they choose. If they do choose to 'opt-in' then the employer must pay contributions into the scheme.
'Entitled Workers' are those employees aged between 16 and 75 earning below £5,824 per annum. Employees in this category must be offered the opportunity to join a workplace pension scheme, but the employer is not obliged to make contributions to it.
HOW MONEYSOFT CAN HELP: - Payroll Manager has an assessment report which will categorise your employees according to their age and earnings - (click 'Pensions - Assessment' to access this report). It can also produce 'csv upload files' which can be used to send details of employees being enrolled to the relevant pension provider.
- Calculate and deduct the pension contributions
The amount you must contribute to the pension scheme is determined by your particular scheme’s rules. However, if you’re using the scheme for automatic enrolment there are minimum contributions you must pay. Minimum contributions are shown in the table below – they’re currently a total contribution of 2% with at least 1% employer contribution (some pension schemes refer to ' 1 and 1 ' levels of contribution, which means that the employee and employer are each contributing 1%).
Minimum contributions are being increased gradually over time.
Some pension schemes calculate pension deductions based on all pensionable pay whereas others use a particular band of their pay known as 'qualifying earnings' (which for 2015-16 are those earnings between £5,824 and £42,385 per annum).
HOW MONEYSOFT CAN HELP: - Payroll Manager is able to calculate and deduct the correct employer and employee deductions based on both 'all pensionable pay' and on 'qualifying earnings', whichever method is applicable to your scheme. The software can also produce 'csv upload files' which are used to communicate this information to many of the major auto enrolment pension providers (including NEST, NOW:Pensions, The People's Pension, Aviva, Beaufort Consulting, Carey Pensions, Corpad, Creative Pension Trust, Friendly Pensions, Friends Life, Gen Life, Legal & General, PAPDIS, Royal London, Salvus, Scottish Widows, Simply, Standard Life, The Pensions Trust, True Potential and The Workers Pension Trust).
- Communicate with each employee
You must write to each member of staff to tell them how automatic enrolment affects them and to inform them of their rights. This is a legal requirement. Following your staging date, employees that are automatically enrolled into your pension scheme (the 'Eligible Jobholders') need to be given information about their contributions and their right to 'opt-out' of the scheme. 'Non-Eligible Jobholders' must be informed of their right to 'Opt-in' to the scheme, and so on.
Some of the major auto enrolment pension providers are able to handle these employee communications for you by sending the relevant letters / emails to your employees at the correct times. Others provide letter templates which you can adapt to your own needs. You may wish to consider the issue of employee communications when making your choice of a suitable pension provider. Moneysoft Payroll Manager is able to produce basic letters * for use when employees are automatically enrolled, for postponement, and to inform those employees that will not be enrolled. (Click 'Pensions - Letters' to produce these letters).
- Complete the automatic enrolment Declaration Of Compliance ('Registration') with The Pensions Regulator.
You must provide certain information to The Pensions Regulator about how you’ve complied with the automatic enrolment duties, such as how many people you’ve automatically enrolled and into which pension scheme(s). You must complete your declaration of compliance even if you don’t have anyone to automatically enrol. Declaration is mandatory and you could get fined if you don’t do it in time. Your declaration deadline is five calendar months after your staging date. Declaration provides a snapshot of your workforce on your staging date and you’ll need to account for each person. Automatic enrolment declaration of compliance (registration) is a secure, online service accessed through the Government Gateway. See https://www.autoenrol.tpr.gov.uk for more details.
HOW MONEYSOFT CAN HELP: - The Pensions Regulator does not have a facility to allow this information to be sent directly from your payroll software. Instead you must manually log on to the Government Gateway website and enter the relevant details there. Payroll Manager is able to produce a report which helps with the compliance process (click 'Pensions - Employee Pensions Report') which shows which of your employees have been added to the pension scheme and which of those haven't.
- Continually assess your workforce before each pay date
You must continue to assess your workforce before each pay day following your staging date. You’ll need to monitor any changes in the age and earnings of your staff. You may have taken on a new employee who needs to be automatically enrolled, or perhaps one of your existing employees has reached their 22nd birthday or has received a pay rise and so becomes an 'Eligible Jobholder'.The auto enrolment 'assessment' process should therefore become part of your regular payroll routine.
HOW MONEYSOFT CAN HELP: - The Payroll Manager assessment report can be run at any point during the year to give an up to date categorisation of each employee.
The Pensions Regulator website gives detailed guidance on all aspects of automatic enrolment.
The Auto Enrolment Support section of our website has a number of user guides for specific pension schemes.