One of the greatest concerns we have comes across as accountants is the proposed government changes around the subject of workplace pensions.
Clients often do not fully understand the rules and regulations of the new scheme, and are unclear about the timescales around automatic enrolment. So Steven Glicher accountants have drawn up a brief guide to workplace pensions, automatic enrolment and identifying eligible jobholders which we hope you’ll find useful.
Automatic enrolment pensions – when will the rules apply to your business?
Any new duties and responsibilities will be determined by your staging date. This date is determined by the total number of employees in your PAYE scheme and is based on information from HMRC held at 1st April 2012. If you’re unclear about this, then have a look at The Pensions Regulator interactive staging tool guide.
Which employees will the new rules apply to?
Before your staging date you will need to identify which workers are eligible and which are non-eligible.
Workers are defined as:
- Those who work under a contract of employment.
- Have a contract to perform work or services personally and are not undertaking the work as part of their own business.
Eligible jobholders who must be automatically enrolled are those:
- Aged 22 to state pension age.
- Working in the UK.
- Earning above £9,440.
If an individual is a director of a company with no other employees, that individual is not generally deemed to be a worker. The company is therefore exempted from automatic enrolment registration.
Workers who have been automatically enrolled have the right to ‘opt out’ of pension saving. If any employee wishes to opt out, then there are certain key points they must be aware of:
There is a set timescale within which jobholders can opt out of active pension scheme membership, known as the ‘opt-out period’. Jobholders are required to opt out by giving notice to the employer.
The opt-out notice should be provided to the jobholder by the pension scheme, acting as a safeguard to ensure the jobholder’s decision is taken without influence from an employer.
When an employer receives an opt-out notice they must refund any contributions deducted from the jobholder’s pay, within specific timescales. Equally, any money paid to the scheme by the employer must also be refunded.
An employer cannot opt out of their duty to automatically enrol eligible jobholders into an automatic enrolment scheme. Opting out only refers to a jobholder’s right to opt out of on-going pension scheme memberships.
What about non-eligible jobholders?
‘Non-eligible jobholders’ have a right to opt in and ‘entitled workers’ have a right to join. All have to be informed and records need to be kept.
Existing pension schemes and auto enrolment.
In your business already has an existing scheme, or has one that could be adapted for automatic enrolment, there are certain minimum criteria that must be adhered to. The Pensions Regulator’s qualifying DC schemes tool will help employers find out whether existing schemes can continue to be used.
Liaising with workers.
Employers are legally required to communicate with all workers (except those aged under 16 or 75 and over) and explain the process of automatic enrolment into a workplace pension and what it means to them.
Registration of eligible workers for automatic enrolment should be done within four months of an employer’s staging date. Registration allows The Pensions Regulator to understand where employers are having problems in meeting their duties, to provide the right guidance.
The Government Gateway is the location to register securely online. It is the employer’s duty to complete registration, but they may authorise someone else to carry out the task on their behalf. For example, they may choose to use their experienced accountant who already deals with their tax affairs and payroll scheme.
If you would like any further information on workplace pensions and automatic enrolment, then give Steven Glicher accountants a call on 0161 485 8007.