A workplace pension is a way of saving for retirement, organised by a person’s employer. It is sometimes called a “company pension”, “occupational pension” or “work pension”.
Workplace pension schemes are employer-managed plans, where your contributions (deducted directly from your salary) and those of your employer gradually build up your pension fund.
This article will provide you with essential information about auto-enrolment in a workplace pension, for both employees and employers. It will also help stakeholders plan their communication with employees about auto-enrolment.
Who will be enrolled in a workplace pension?
All employers must offer a pension scheme – this is known as automatic enrolment. They must contribute a set percentage of your salary into your pension fund.
You will automatically be enrolled in a scheme if you:
• are over 22
• are under the statutory pension age
• earn more than £10,000 a year
• are not already part of a workplace pension scheme
• work in the UK
You can opt out of the scheme at any time, usually by completing a form and returning it to your employer or pension provider. If you opt out, your employer is required to re-enrol you every 3 years — and you can opt out again if you wish.
If you can afford it, it is recommended that you participate, as the state pension alone is not enough for most people to live decently in retirement.
Contributions to my pension fund
The total minimum contribution is 8%, of which:
• 5% is deducted from your net salary
• 3% is covered by the employer and through tax deductions
You can also make additional contributions if you wish.
Start date of legal obligations
For an employer, the legal obligations regarding automatic enrolment begin on the day the first employee starts work. This is known as the obligation start date, and cannot be changed.
Preparing for the start date of obligations
What you need to do depends on the age and income of your employees.
On this day, you need to assess employees to see if they meet the criteria to be automatically enrolled in a pension scheme.
Exceptions for directors from automatic enrollment
Some directors may be excluded from the legal obligations regarding automatic enrollment, even if they have an employment contract, because they are not considered workers.
A director is considered an employee only if:
• he/she has an employment contract with the organization
• at least one other person (may be another director) also has an employment contract with the organization
An employment contract can be written, oral or implied. If there is no clear evidence of an employment relationship, The Pensions Regulator will not consider that such a contract exists.
When automatic enrollment obligations do NOT apply
You are not required to register automatically if:
• You are the sole director of an organization/company, with no other employees
• The organization has several directors, but none of them have an employment contract, with no other employees
• The company has a single director with a contract, but with no other employees
• the company has been liquidated or dissolved
• The company has permanently ceased activity
If you do not have qualified workers, you do not need to make a declaration of compliance.
If you have employees who do not meet the criteria, but you are not exempt, you have legal obligations and must complete the declaration of compliance.
Important Warning
If you declare to The Pensions Regulator that you are not an employer, it means that you have no obligations under the Pensions Act 2008.
Warning: Providing false or misleading information to avoid obligations may result in fines or criminal prosecution.
If your circumstances change, you must inform The Pensions Regulator immediately.
Do you need help?
If you would like to discuss in more detail, please contact Super Financial Limited (SFL). Our consultants are qualified and dedicated to solving the accounting requirements of each client, offering customized solutions depending on the field of activity and needs.
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We have offices open in Leyton, Burnt Oak, Luton, Manchester, Milton Keynes and Northampton.
