UK: Automatic Enrolment - A Quick Guide To Your Obligations

Last Updated: 11 December 2013
Article by Kate Richards

Introduction

Since 1 October 2012, employers have been required to enrol the majority of their employees into a workplace pension scheme automatically. The new obligations are being phased in, starting with the largest employers. The staging date, the date when the automatic enrolment obligations begin to bite, is determined by the number of employees an employer has. For employers with fewer than 800 employees, the staging date will be between 1 November 2013 and 1 April 2017.

There are a number of actions to take before your staging date, including:

1. making sure the chosen scheme is a qualifying scheme;

2. identifying which employees are affected;

3. providing information to them and to the pension scheme provider; and

4. making the necessary payroll arrangements. It is important to start planning now.

Our quick guide shows you how auto enrolment will affect your business, provides you with a list of your obligations and shows you how Nabarro can help.

Employers – will automatic enrolment affect you?

Use our easy to follow flow chart below to find out how auto enrolment will affect you.

Employers – a summary of your duties at a glance

To help you negotiate the complex maze of obligations – here is a summary of your duties as an employer.

Question

Answer

Who must be automatically enrolled?

All jobholders aged between 22 and state pension age who meet the earnings threshold (£9,440 for 2013/14).

Enrolled into what?

A qualifying automatic enrolment scheme - a registered occupational or personal pension scheme selected by the employer which satisfies certain quality requirements.

When?

For existing qualifying jobholders:

For new qualifying jobholders:

  • The first day of employment.

PLUS:

Employers must re-enrol every three years (this includes employers who have previously opted out).

BUT:

  • Three-month postponement possible; or
  • The employer can bring forward staging date.

Who is a jobholder?

An employee or contract worker aged at least 16 and under 75 who is working or ordinarily works in Great Britain or Northern Ireland to whom qualifying earnings are payable by the employer in the relevant pay reference period (e.g. weekly, monthly).

What are "qualifying earnings"?

Gross earnings (including bonuses, etc.) between £5,668 and £41,450 (2013/14 to be reviewed annually).

Can an employee who is not subject to automatic enrolment opt in?

Yes, if a jobholder, and can require an employer contribution on qualifying earnings.

Who is responsible for enrolling them?

The person responsible for paying them, i.e. their employer, and for agency workers, usually the agency.

Can jobholders opt out?

Yes, after they have been automatically enrolled, but employers must not offer them any inducement to do so.

Who has to contribute?

The employer must contribute but there is no statutory obligation on the employee to contribute as long as the minimum contribution requirement has been met (although most employees will be required to do so). This is a major change for employers. Some employers used stakeholder schemes in the past but did not contribute to them. This is no longer possible.

How much?

Contribution rates will be phased in over six years. At the end of the transitional periods contributions must be at least eight

per cent of qualifying earnings, with at least three per cent coming from the employer.

Our fixed fee products

Below is a summary of the services that we can offer you alongside details of our fees.

Service

Fee

30 minute initial telephone conversation to explore employer automatic enrolment duties.

Free

Automatic Enrolment – A Guide For Employers.

Free

Review of announcements to employees prepared by the employer/advisers/the insurer to advise on the automatic enrolment requirements and general obligations for employers.

£750 per announcement

Initial review of contracts of employment to determine what changes, if any, are required to ensure compliance with the automatic enrolment requirements.

£250 per contract type

Redrafting contracts of employment to ensure automatic enrolment compliance.

£750 – £1,500 per contract type

Reviewing and advising on changes required to existing employee information, i.e. booklets, handbooks and website information in respect of current pension arrangements to cover automatic enrolment.

£1,000 per document

Drafting changes to existing employee information, i.e. employee handbook and website information.

Fee to be agreed after initial review completed

Advising on the interaction between salary sacrifice and automatic enrolment.

£1,000

Preparation of initial communication with employees in respect of salary sacrifice and automatic enrolment.

£1,000

Reviewing third party agreements with insurers for the provision of an automatic enrolment scheme (group/personal pension).

£2,000

Negotiating with insurers third party agreements for the provision of an automatic enrolment scheme.

Fee to be agreed after initial review of the documentation

Review of communications prepared by insurers in respect of automatic enrolment.

£500 per announcement

Initial advice on the main considerations where an employer intends to use an existing occupational pension scheme to automatically enrol employees.

£1,500

Amending an existing occupational pension scheme documentation to ensure it is automatic enrolment compliant.

Fee to be agreed after an initial review of the documentation

For employers with existing occupational pension scheme arrangements which are to be used for automatic enrolment, initial communication with the trustees of your scheme on the automatic enrolment requirements.

£500

Review of master trust documents in respect of: scheme amendments; investment options; information sharing; reporting; and record keeping and contributions.

Fee to be agreed after an initial review of the documentation

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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