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Auto Enrolment

Auto-enrolment and the employer duties at a glance

Mansion Park Limited can guide you through the challenges of this new legislation and provide a complete analysis of your options, so that you can identify and implement an agreed plan that best suits your requirements. We can help create bespoke solutions for you and your team and carry out a series of one-to-ones with your staff, helping tackle virtually every issue and question thereafter. You will be able to benefit from our plain and very competitive pricing structure, and our specialised software system is included as part of our offering.

Taking the stress and inconvenience away from you

Auto-enrolment cannot be ignored, and Mansion Park Limited understand the importance of creating bespoke solutions and can take the stress and inconvenience away from you. Compliance with auto-enrolment doesn't have to be heavy duty. If you would like to find out more about how we can help, please contact us for more information.

When is it happening?

The employer duties are being introduced in stages from October 2012. Larger employers generally have their staging date earlier than smaller employers.

Identifying your staging date
The date your employer duties first apply is known as your staging date and it's based on the number of people in your largest Pay As You Earn (PAYE) scheme on 1 April 2012. TPR will tell you when your staging date is at least twelve months in advance. They will also send you a reminder three months before your staging date.

Bringing forward your staging date
You can choose to bring your staging date forward to coincide with other key company dates such as your end of year accounting. You will have to contact The Pensions Regulator (TPR) in writing to confirm the new staging date you have chosen. This should be done at least one calendar month before the new chosen staging date.

How can Mansion Park Limited help?
We're pension specialists and have a proven track record in designing solutions to meet your and your workers' needs.

We recognise that auto-enrolment poses a considerable challenge to your business. You'll need to introduce a range of new processes, record keeping and reporting requirements, to comply with your employer duties, so advanced planning is vital. The quicker you act the more time you'll have to consider your options and adopt the most appropriate strategy for your business. While it's likely your operational costs will rise, the decisions you make now will help you to manage these costs.

What is the effect on my workforce?

You'll need to assess your workforce to determine whether they're classified as a 'worker'. This can also include contractors and/or agency workers.

The different types of worker

There are three different categories of worker, determined by their age and how much they earn.

Eligible jobholders – must be automatically enrolled into an auto-enrolment scheme
Non-eligible jobholders – have the right to opt in to an auto-enrolment scheme
Entitled workers – have the right to join a pension scheme

The table shows you how to identify each type of worker.

[1] These figures are for the 2013/14 tax year.

Exclusions to the employer duties

People who are treated as workers

The following people are treated as workers but are not covered by the employer duties:

those who do not work or ordinarily work in the UK
those under age 16 and
those aged 75 and over.

People who are not treated as workers

The following people are not treated as workers so the employer duties don't apply to them:

the self-employed
members of the armed forces
and directors of companies unless they have a contract of employment to work for that company and there is someone else employed by the company under a contract of employment.

Postponement

You can use postponement to defer the assessment of workers and your employer duties. The postponement period can't be more than three months.

The end of the postponement period is known as the deferral date and you must assess workers on this date.

What you must do if postponement is used

If you use postponement, you must provide workers with a postponement notice. This must be issued within a month and a day of:

your staging date
the worker's first day of employment after your staging date and
the day that a worker becomes an eligible jobholder (for example, the day a worker reaches age 22).

What are my employer duties?

Your employer duties will depend on the types of worker you employ.

The table summarises your employer duties for each type of worker.


Category of worker - Eligible jobholder

Summary of your employer duties

Automatically enrol them into an auto-enrolment scheme.
Make contributions on their behalf.
Process any opt-out notices and refund contributions paid.
Roughly every three years, re-enrol those who have previously opted out.
Keep records of the auto-enrolment and opting out processes and provide to The Pensions Regulator (TPR) if requested.


Category of worker - Non-eligible jobholder

Summary of your employer duties

Provide information about their right to opt in to an auto-enrolment scheme.
Arrange pension scheme membership and make contributions on their behalf.
Process any opt-out notices and refund contributions paid.
Continually assess their age and/or earnings.
Keep records of the enrolment, opting in and opting out processes and provide to The Pensions Regulator (TPR) if requested.


Category of worker - Entitled worker

Summary of your employer duties

Provide information about their right to join a pension scheme.
Arrange pension scheme membership.
Deduct contributions from their salary and pay these into the scheme. You are not required to make contributions although you can choose to do so.
Continually assess their age and/or earnings.
Keep records of the joining process and provide to The Pensions Regulator (TPR) if requested.

What is the effect on pension schemes?

You must register with The Pensions Regulator (TPR) that you have an auto-enrolment scheme in place by at least four months after your staging date.

You'll also have to re-register roughly every three years. The good news is, if you have an existing pension scheme, you can use this to meet your employer duties so long as it meets certain criteria.

There are three sets of criteria: auto-enrolment criteria, qualifying criteria and quality requirements. The following information relates specifically to contributions under the quality requirements.

Minimum requirements
The minimum contribution level required for an auto-enrolment scheme is based on qualifying earnings. Qualifying earnings are a band of earnings of more than £5,668 and £41,450 or less. These figures are for the 2013/14 tax year and are expected to change each year. Qualifying earnings include salary, wages, overtime, bonuses, commissions, statutory sick pay, statutory maternity pay, ordinary or additional statutory paternity pay and statutory adoption pay.

To allow you to spread the cost of your employer duties you can phase in the minimum contributions as shown in the table.

Agreement must be in place for jobholder to make up at least any difference between the total and the employer amount.

Certification
As an alternative to using the qualifying earnings definition, you can choose to use certification.

A certificate can cover all workers or groups of workers. For example, you can use one certification basis for one group of workers and a different certification basis for other workers.

The contribution levels for certification can be phased in over six years from October 2012 and there are three certification options available as shown in the table below.

Certifying in advance
You can certify for up to 18 months using the payroll data that's available at the time you certify. You must re-certify at least every 18 months or sooner if there is a 'significant change' such as:

changes to the scheme contribution rate or
a company takeover/merger.

The certification options and how they may be phased in are shown in the tables.


9% of pensionable salary

You can use a scheme definition of pensionable salary.
Contributions must be calculated from the first pound
of pensionable salary.
Pensionable salary must be at least basic pay[2].


8% of pensionable salary, provided at least 85% of total payroll is pensionable

You can use a scheme definition of pensionable salary.
Contributions must be calculated from the first pound of pensionable salary
Pensionable salary must be at least basic pay[2].


7% of all earnings[3]

All earnings must be pensionable.
Contributions must be calculated from the first pound of earnings.


[2] Basic pay must include earnings before deductions such as tax and National Insurance, holiday pay and some statutory benefits but doesn't have to include variable pay such as bonuses, overtime and commission.

[3] Earnings must include everything that's included in the definition of qualifying earnings.

Certification options
The tables show the three certification options and how they may be phased in.

Agreement must be in place for jobholder to make up at least any difference between the total and the employer amount.

[4] Earnings must include everything that's included in the definition of qualifying earnings.

What happens if I do nothing?

The employer duties are not optional. The Pensions Regulator (TPR) will be responsible for ensuring that you comply with your employer duties.

Penalties
The Pensions Regulator (TPR) have the power to issue compliance notices and impose penalties if you don't comply with your employer duties, for example, failing to automatically enrol eligible jobholders or failing to refund contributions to those who have opted out. Similarly you can't encourage jobholders to opt out of the pension scheme or encourage candidates to do so during the recruitment process.

Appealing against a penalty
You have a right to appeal against any penalties imposed by The Pensions Regulator (TPR) and must do so in writing. If The Pensions Regulator (TPR) decides to review a penalty, it will be suspended from the date they begin a review until the date the review is completed. They can then confirm, vary or revoke the penalty or substitute it for a different penalty.

What is NEST?

You may have heard about NEST, the National Employment Savings Trust.

NEST is a pension scheme that you can use to meet your employer duties, and it's primarily aimed at low to medium earners and small employers that don't have access to a company pension scheme. It's designed to be a simple, low-cost option and there are certain restrictions that apply.

There is currently a general ban on transfers in or out.
There is an upper contribution limit each tax year.
There are limited options at retirement which will result in less choice and flexibility for workers.
There are limited investment options. Workers will be automatically invested in a default fund based on time to retirement. This will not take into account an individual's attitude to risk.


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The guidance and/or advice contained within this website is subject to UK regulatory regime and is therefore restricted to consumers based in the UK.

Mansion Park Limited is Authorised and Regulated by The Financial Conduct Authority. Registered office: Tournament House, 4 Tournament Way, Ashby de la Zouch, Leicestershire LE65 2UU. Registered in England No:3328810. Website design by Goldmine Media.