Auto Enrolment Pension
 

 

Information on auto-enrolment Auto Enrolment Pension

  1. Auto-enrolment for pensions explains how Auto Enrolment Pensions are to be implemented.
  2. Our system will start Pension auto-enrolments for all the eligible jobholders(employees) of any company once the employer of that company enters the Auto Enrolment Pension STAGING DATE. Without a Auto Enrolment Pension STAGING DATE there will be no auto-enrolment for the company. Of course, by 2018 all eligible jobholders will be subject to auto-enrolment by law. Before 2018 the requirement for Auto Enrolment Pensions depends either on the size of the company or whether the employer opts to introduce Auto Enrolment Pensions early.
  3. Auto-enrolment means an eligible jobholder and the employer concerned are obliged to contribute to a Auto Enrolment Pension Scheme once the employee's qualifying earning for any pay period, consisting of all taxable earning for that pay period, exceeds the Earning Threshold defined by HMRC.
  4. How much is to be deducted from the jobholder's gross pay for the Auto Enrolment Pension Scheme is determined solely by the employer and the pension provider with the prior approval of HMRC.
  5. In general there are 2 types of auto-enrolment deductions. One is a fixed amount deduction, the other is a percentage of gross pay deduction. Auto-enrolment also means once a jobholder's gross earning hits the threshold the deduction will automatically take place, similar to NIC deductions. If you do not earn enough in any particular pay period, you will NOT be enrolled into paying the Auto Enrolment Pension. Auto-enrolment is calculated on a pay period basis, not on an annual pay basis. However, an employee has the right to make voluntary contributions if his earnings are below the defined threshold.

    Other information relevant to auto-enrolment are:
    • It is Mandatory: Once the employer states the Auto Enrolment Pension Staging Date, or by April 2018, all company eligible jobholders will be enrolled into Auto Enrolment Pensions.
    • Age: All eligible jobholder aged between 22 and the state pension age are affected
    • Income: The current annual threshold is earnings above £9,440, divided into the weekly or monthly thresholds etc.
    • Location: All jobholders working in the UK are affected.

  6. The auto-enrolment fixed amount deduction or percentage based deduction could be tailored on an individual employee basis, a group of employee basis, or a company wide basis. Whatever basis, the payroll system will not validate its validity and accuracy. Our payroll system will take any instruction given by the employer when the Auto-enrolment Pension Scheme is set up. It is up to the employer to state the details of the Auto Enrolment Pension Scheme which it has agreed with the pension provider accurately. There is no way we can validate the instruction other than accept the given details as is.
  7. Should a jobholder in a company who has enrolled into the Auto-enrolment scheme not be allocated to any instruction stating if a fixed amount or a fixed percentage is to be deducted, we will not do any deduction. We will instead only show a WARNING NOTICE to the payroll manager. It is up to the manager to react to the warning notice to add the pension deduction instruction to deduct on a fixed amount or on a percentage of the gross pay. We will let the payroll to go through if the payroll manager, for whatever reason, chooses to ignore the warning.
  8. Our Auto-enrolment pension will be available for use from 1st October 2013. Our payslips will show the Auto-enrolment deducted amount, if any. There will be reports showing the individual deduction and consolidated deduction amount for the employer concerned to use to deposit the deducted amount to the pension provider.
  9. For Additional information regarding Auto Enrolment Pension refer to the following details from:
    https://www.autoenrol.tpr.gov.uk
    https://www.gov.uk/government/organisations/department-for-work-pensions

  • Auto Enrolment Pensions Key Terms
  • 9.1 Worker: An employee or someone who has a contract to perform work or services personally, that is not undertaking the work as part of their own business.

  • 9.2 Jobholder: A worker who is aged between 16 and 74, is working or ordinarily works in the UK under their contract, has qualifying earnings.

  • 9.3 Eligible jobholder: A jobholder who is aged between 22 and state pension age, has qualifying earnings above the earnings trigger for automatic enrolment.

  • 9.4 Non-eligible jobholder: A jobholder who is aged between 16 and 21 or state pension age and 74, has qualifying earnings above the earnings trigger for automatic enrolment OR is aged between 16 and 74, has qualifying earnings below the earnings trigger for automatic enrolment.

  • 9.5 Entitled worker: A worker who is aged between 16 and 74 is working or ordinarily works in the UK under their contract does not have qualifying earnings.

  • 9.6 Qualifying earnings: This includes all of the following pay elements (gross) Salary, Wages, Commission, Bonuses, Overtime, Statutory Sick Pay, Statutory Maternity, Paternity & Adoption Pay. These earnings are used to identify whether an individual is a eligible jobholder or a non-eligible jobholder, and also to determine the level of contributions a scheme must require.

  • 9.7 Automatic enrolment (also called autoenrolment,autoenrolor AE):
    When an employer places eligible jobholders into an automatic enrolment scheme 'automatically', ie without the jobholder's involvement. An individual who is automatically enrolled is free to opt out and can stop saving at any time, but needs to take action to do so.

    The duty on an employer to ensure workers meeting certain requirements become members of a qualifying Auto Enrolment Pension scheme without them having to make any active decisions e.g. complete an application form or choose an investment profile (although they can make this choice if they wish). The employer will use a qualifying pension scheme to auto-enrol and re-enrol their workforce.

  • 9.8 Qualifying Scheme: A pension scheme that meets certain minimum standards set by legislation. There are different standards depending on the type of scheme.

  • 9.9 Automatic Enrolment Scheme: A qualifying scheme that meets additional criteria to be an automatic enrolment scheme. Eligible jobholders who are not already a member of a qualifying scheme on the employer's staging date must be automatically enrolled into an automatic enrolment scheme. The employer will choose the scheme for automatic enrolment.

  • 9.10 Staging: The staggered introduction of the new employer duties, from 2012, starting with the largest employers. New PAYE schemes will be staged last.

  • 9.11 Staging Date: The date when the new law is 'switched on' for a business.

  • 9.12 Earnings Trigger for Automatic Enrolment: The amount of qualifying earnings a worker must earn before the duty for their employer to automatically enrol the worker is triggered. For the 2013-2014 tax year, this is set at £9,440. This figure will be reviewed annually by the Government.

  • 9.13 Lower and upper levels of Qualifying Earnings: A worker's earnings below the lower level and above the upper level are not taken into account when working out pension contributions. For the 2013-2014 tax year, the lower level is set at £5,668 and the upper level is set at £41,450. These figures will be reviewed annually by the Government.

  • 9.14 Phasing: For DC (defined contributions) schemes, the gradual phasing-in of contribution levels until they reach the minimum level required by law.

  • 9.15 Registration: A duty on employers to tell the regulator information about the pension scheme they are using and how many people they have enrolled into it.

  • 9.16 Postponement: Postponement is an additional flexibility for an employer that allows them to choose to postpone automatic enrolment for a period of their choice of up to three months.

  • 9.17 Deferral Period: A Deferral Period allows a company to postpone running auto-enrolment assessments for up to 3 months after their 'Staging Date'.

  • 9.18 Deferral date / Re-enrolment Date: The Deferral date / Re-enrolment Date is the last day of the postponement period. It is key for the employer as it is the date on which they must assess the worker and it must be included in the postponement notice.

  • 9.19 Enrolment date: The enrolment date is the start date of active membership for the jobholder.

  • 9.20 Joining window: The one-month period during which enrolment must be completed.

  • 9.21 Inducement: Under automatic enrolment legislation it is illegal for employers to encourage workers to opt out or give up active membership of a qualifying pension scheme. This is known as ‘inducement’, an example of which would be where an employer offers employees cash or any other benefit not to join a qualifying pension scheme.

  • 9.22 Opt-out notice: A written notice to opt out given by a jobholder to their employer. If the jobholder wishes to opt out after receiving enrolment information, they must do so by giving an opt out notice to the employer which is usually provided by the pension scheme. On receipt of this notice the employer must refund contributions that have been deducted.

  • 9.23 Opt-in (also Opting in): A non eligible jobholder has the right to opt in to their employer’s qualifying pension scheme. If a non eligible jobholder decides to opt in by giving their employer an ‘opt in’ notice, then the employer must enrol them into the qualifying pension scheme and make minimum contributions.

  • 9.24 Opt-out (also Opting out): Eligible jobholders who have been automatically enrolled into a qualifying pension scheme and noneligible jobholders who have opted in, have the right to opt out within 1 month of the beginning of their membership, by completing an opt out notice. In this event, the jobholder is treated as if the enrolment that had just taken place had not happened.

    A jobholder is able to opt out of the scheme but not out of automatic enrolment.

    To be able to opt out, the jobholder must have become an active member of the pension scheme under automatic enrolment or opt in provisions and have received the enrolment information from their employer.

  • 9.25 NEST (National Employment Savings Trust Corporation): A pension provider available to all employers who want to use it. NEST is a Auto Enrolment Pension scheme designed for automatic enrolment that is available to any UK employer regardless of the organizations’ size.

  • 9.26 Department of Work & Pensions (DWP): Policy owner and responsible for enabling and coordinating activity for the programme. Defines the communication required between employers and employees.