12 FAQs people ask about auto-enrolment
Auto-enrolment applies to all employers, though smaller employers will not be required to set up an auto-enrolment pension scheme until their 'staging date' - generally some time from 2014 onwards.
You should ensure that you understand what you need to do well in advance, as setting up an auto-enrolment pension scheme can be complex and time-consuming.
Your staging date - the date auto-enrolment starts for your business - depends on how many employees you have. For existing employers, the staging date is normally based on the number of people in their PAYE scheme on 1 April 2012.
You can check your staging date by entering your employer PAYE reference on the Pensions Regulator website.
Yes. You will need to check whether your existing scheme meets the requirements of auto-enrolment: for example, in terms of which employees can be members and the size of contribution you make. You will also need to make sure you set up the right systems to handle automatically enrolling your employees.
Auto-enrolment applies differently depending on how old the person is and how much they earn.
Auto-enrolment applies to all employees. It also applies to any worker who has to perform work personally and is not doing this as part of their own business.
Often, if you use agency workers, the agency will be responsible for paying the workers - and the agency will also be responsible in terms of auto-enrolment. But if you take on a temporary worker directly, or are responsible for paying an agency worker, then you must also deal with auto-enrolment.
Self-employed freelances will not normally be covered by auto-enrolment. The rules are similar to the rules which determine whether someone counts as genuinely self-employed.
If in doubt, you should take advice.
There is a government scheme, the National Employment Savings Trust (NEST), or you can choose a pension scheme offered by a private provider.
An independent financial adviser can help you decide which scheme is best for your business. Amongst other things, you will want to consider what the costs of the scheme are and how easy it is to use.
Eligible jobholders - aged between 22 and state pension age and earning at least £10,000 a year (2015/16) must be auto-enrolled in the pension scheme. At the same time, you must provide a written explanation of what this means and their right to opt-out.
The employee then has a month to opt-out. Any contributions that have already been made by the employer or deducted from the employee's pay are then refunded.
If an employee decides that they want to leave the pension scheme after the end of the opt-out period, they do this under the normal rules of the scheme.
If an employee opts out or leaves a scheme, the employee can make their own savings and pension arrangements (or choose not to save at all). You do not automatically have to make any contribution (unless agreed otherwise in the employment contract).
Yes, an employee can apply to re-enrol in the pension scheme. They can only do this once every 12 months.
Three years after an employee opts-out, you must automatically re-enrol them. Again, you give them the opportunity to opt-out if they wish.
When you take on a new employee, you need to assess what their status is in terms of auto-enrolment - depending on their age and how much they are paid (see 4). If the employee is an 'eligible worker' you would then normally need to auto-enrol them in the scheme.
You can choose to postpone automatic enrolment for up to three months. For example, you might want to do this if you are employing a temporary worker. However, you must also give the employee a postponement notice telling them that auto-enrolment has been postponed and explaining their rights.
You should give your employees general information about your pension scheme. For example, you might pass on information from the scheme provider or let them know about other sources of information.
You should be careful not to give advice or encourage an employee to make a particular decision, as you are not qualified to give financial advice. You can offer employees up to £150-worth of independent financial advice on pensions as a tax free benefit.
No. You must not do anything to deter your employees from auto-enrolling: for example, offering higher pay to employees who opt-out, or discriminating against employees who do not opt-out. You could face substantial fines or even criminal action.
Initially, the amount the employer must contribute is 1 per cent of the employee's qualifying earnings between £5,824 and £42,385 (2015/16). The total contribution made by employer and employee must be at least 2 per cent.
From 1 October 2017, this increases to an employer contribution of at least 2 per cent, and a total contribution of at least 5 per cent.
From 1 October 2018, the minimum employer contribution increases to 3 per cent and the minimum total contribution to 8 per cent.