1. Overview
Employers have new obligations to enrol most workers into a pension scheme and make contributions towards that scheme on behalf of the employee - this is called automatic enrolment. If you don't already offer your employees a workplace pension scheme, you must set one up before your business begins automatic enrolment.
You may be able to continue to offer your existing pensions scheme if it qualifies for automatic enrolment.
2. What is automatic enrolment?
The law on workplace pensions has changed to make it easier for people to save for a pension. Rather than having to actively choose to join a pension scheme, workers are put into a scheme automatically by their employer. If workers don't want to be in the pension scheme, they must actively opt out.
As an employer, you must automatically enrol all employees in a pension scheme who are:
- aged between 22 and state pension age
- working in the UK
- earning over £9,440 a year
You will have to pay a minimum employer contribution for all your workers that you enrol into your scheme. You can find out what your minimum employer contribution will be on the Pensions Regulator's website.
Staging dates
Automatic enrolment is being phased in in a series of staging dates, with the largest employers being required to comply first. You can find out when your staging date is on the Pensions Regulator's website.
3. Setting up a pension scheme
If you don't already have a workplace pension scheme, you will need to set one up before your staging date. You will need to find a pension provider that offers a scheme meeting the legal requirements for automatic enrolment.
Finding a provider
An independent financial adviser or employee benefit consultant will be able to give you advice about choosing a pension provider. If you have an accountant, they may be able to offer you advice or help you find an adviser.
The Pensions and Lifetime Savings Association (PLSA) has information about commercial pension providers, as does the Association of British Insurers (ABI).
When choosing your pension provider, you should ask them to show how their scheme meets the legal requirements for automatic enrolment.
Setting up your scheme
Once you have selected a pension provider, you will need to work with them to agree:
- contribution rates
- due dates for payment of contributions
- how tax relief will be handled
- what information is needed about your employees
- how long it will take for your employees to become active members of the scheme
- how opt outs, opt ins and joiners will be handled
4. Using an existing pension scheme for automatic enrolment
If you already have a workplace pension scheme in place, you may be able to continue using your existing scheme if it meets the qualifying criteria. If your scheme does qualify, you will be able to continue to use it as normal for existing members and, providing it meets some additional criteria, you will be able to use it to automatically enrol new members.
Defined contribution (DC) pension schemes
The Pensions Regulator provides a step-by-step tool to help you decide whether your DC pension scheme qualifies for automatic enrolment. If you don't feel confident about deciding whether your scheme qualifies, you should ask your scheme provider or trustees.
Defined benefit (DB) and hybrid pension schemes
The qualifying criteria for DB schemes are much more complex. You should talk to your scheme provider or trustees to find out whether your DB scheme qualifies for automatic enrolment.
Stakeholder pensions
Stakeholder pension schemes can be used by employers for automatic enrolment purposes, provided the schemes meet the necessary criteria.
If you currently offer access to a stakeholder pension scheme, you should continue to take workers' contributions from their pay and send them to the scheme if the worker wants you to.
The Pensions Regulator has detailed guidance for pensions professionals about the minimum requirements for existing pensions schemes.
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