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Auto Enrolment Workplace Pensions

'Auto’ or ‘Automatic Enrolment’ is a Government requirement to get employees into a workplace pension scheme. It's called this because it's automatic for your staff – they don't have to do anything to be enrolled into your pension scheme. But the scheme is not automatic for you. You will need to take steps to make sure your staff are all enrolled by your 'Staging Date'.  Otherwise the Pensions Regulator boast that they will make unannounced spot checks and issue fines.

The Government and the Pensions Regulator assume that you as an employer have time to go through all the documents and rules by yourself.  The pensions’ software and systems expect you to be running your own payroll, rather than subcontracting the problem to an accountancy practice. The whole system is incomplete, poor quality and confusing.

We are happy to support clients through the 'auto enrolment' process. This is just one part of our comprehensive Business Companion Service.

At Simple Accounting we will do most of the setting up for you - and we have made certain decisions about the service we offer to make the process simple for you, our clients.

Workplace Pensions : we will work with you to:

1) Check whether your business is an ‘Employer’.We will help you decide whether your business will be considered as an employer by the Pensions Regulator.  For example Director only companies may be considered exempt from duties (see details below).  If you are not an 'employer' we can deregister you from the Pensions Regulator and you will have no more duties unless you start to employ staff.

2) Nominate your contacts with the Pensions Regulator. We are happy to do this for you. You, as Business Owner will be the primary contact, Simple Accounting will be the Secondary contact.  We need your 'Letter Code' from the Pensions Regulator - please pass this to us when it arrives, and we will set up contacts in this way.

3) Set up a pensions scheme.  This will normally be with the Peoples Pension (see details below). Note that you do need a scheme if you are an employer – even if you have no ‘eligible’ staff – see 4). You must provide your bank account details and some evidence of this. If you already have a staff pension scheme we will check if this sufficient.

4) Assess the eligibility of your staff.If you have ‘eligible’ employees at your staging date they must be auto enrolled into your workplace pension and you must contribute towards it. Eligible employees may opt out.  Other employees may opt in. We will look at this with you a month or so before your staging date.

The criteria for ‘Eligible’ employees are that they :
•    earn over £833 a month;
•    are aged 22 or over; and
•    are under State Pension age.

5) Send letters to your staff explaining the Pensions Scheme. We will need details of all your staff including postal addresses. We will then prepare letters explaining details including the procedure for opting in and out. You should send these to staff within the month preceding your staging date. 

6) From Staging Date upload monthly payroll data. We will arrange file uploads into your pension scheme for you every month.  Your pension contributions will be taken out by Direct Debit.

7) Update staff data and enrol new staff.  You will keep us informed as new staff join or become eligible – so they may be enrolled into the Pensions Scheme if appropriate.  We also need to know if staff wish to opt in or out.

8) Send a Statement of Compliance to The Pensions Regulator to confirm that all steps have been completed.

9) Re enrol your staff every three years

The Details of our Simple Standard Pension scheme

Employer Only Contributions and Rates

The Pensions Regulator (PR) has started issuing non compliance fines to businesses.  It also offers a complaints service for employees who are unhappy about the administration of their workplace pension schemes.  We therefore think the PR will concentate enforcement where employees are disgruntled.  

One way we can reduce the need for consultation with staff is to make the standard pension we offer, non contributory.  That means that the employer will pay all the minimum contribution, rather than force the employee to share the burden.  There will be no reduction in their net pay (at a time when few can afford it).  The staff will be unable to complain about consultation or bureaucratic failures, if the employer is picking up all the costs anyway.  This method even saves a little Employer National Insurance!    

This recommendation is for Eligible and Non-Eligible workers only.  As 'Entitled' workers are earning below the threshold for qualifying earnings (£503 per month) then no contributions will be calculated for them.

 

Set Rates

Our second recommendation is derived from the first.  There is more flexibility here.  We are proposing to accept set rates for all the schemes we create.

We are reluctant to have many variables, because of the difficulty of tracking of the rates created.  Each year the minimum rates of contribution will increase.  And we have to alter the rates on the Pension provider software also.  Each year the rates increase we will have to alter 600 individual figures, for our fifty employers.  If we have too many we run the risk of forgetting a particular employee.  So simple rates:

We therefore propose the following Employer/employee contribution rates:

2019/20
Eligible 8% / 0%
Non Eligible 8% / 0%

2018/19
Eligible 5% / 0%
Non Eligible 5% / 0%

Note: Contribution rates are calculated as a percentage of 'Banded Qualifying Earnings' only : the band of earnings between £503 and £3,863 per month.

Additional Contributions
Additional employee contributions waste national insurance, so we generally advise against them.
Ours is a simple scheme, and we cannot administer additional voluntary contributions from employees as part of our Payroll Service. However, if a member of staff wishes to make a one off payment towards their pension scheme, they can simply call the Peoples Pension Member Services directly on 0300-2000-555 to arrange it.

It is also possible for employers to make additional contributions. These can be made on a regular basis or on an occasional basis as a staff incentive. Please contact Simple Accounting Ltd to organise this.

Our Pensions Provider - The Peoples Pension
Our final proposal is to recommend The Peoples Pension (PP).  If possible we only want to use this Pension Provider for our clients with payroll.  The reasons are various:

1. Lower charges for your staff.  PP depends on a 0.5% Annual Management Charge applied to the funds of each pensioned staff .  This is not the lowest.  But there are no other charges.  Therefore it is likely to be the cheapest in the medium term.  See this review
2.  There is no charge for withdrawing your funds to a cheaper fund, or to an alternative pension provider.  This means that the PP will have to remain competitive, lest employers move to a cheaper or better provider.
3.  There is no regular basic fee for account management per month (unlike Now Pensions).
4.  There is no deduction from the initial contribution (unlike NEST).
5.  The employer pays no fees for middleware administrative systems that we expect that smaller employers will neither need nor want.
6.  The website is fairly friendly.  The employer is given a portal with a log in and password, and the employees can get a login which will allow them to see their pension details.
7.  The staff answer the phone (unlike our experience with Scottish Widows).
8.  Emails often get a reply.
9.  The funds are not owned by a branch of the state (unlike NEST).
10. The scheme allows 'Net Pay' Tax Relief which should save some of the tax wasted on Employee contributions (like Now Pensions, but unlike NEST pensions).

Our recommendation is not a ringing endorsement.  There might be a need to change our view in the future.  But in the absence of any better criteria this will be the main Pension Scheme provider for our standard scheme.

In our assessment we can handle the enrolments and the calculations, the creation of each Pension scheme and the registration with the Pensions Regulator within our fee.  We cannot do this with widely differing arrangement for the separate employers we represent.

It is important to be able to show that you are running a compliant process - show the communication between the staff and pension provider.  PP will help with that.

Making Auto Enrolment Easy - the People Pension (You Tube Video)

Guidance on your Workplace Pension for your Employees (Word document)

Director Only Companies

Pensions Regulator says that Automatic Enrolment duties apply to all employers with at least one worker in the UK. A worker is defined as any individual who works under a contract of employment (an employee), or has a contract to perform work or services personally and is not undertaking the work as part of their own business. Exceptions to the worker status as are as follows;

  •     One person companies
  •     Member of Armed Forces
  •     Office Holders

Two Director Companies

Where an entity has two directors, the employer needs to determine whether they have an equal working relationship. If they establish that one is not employed by the other, there will be no automatic enrolment duties unless they take on a worker in the future.

It is an employer duty to determine whether an individual is a worker or not as defined above.

Companies with Directors and other Workers

Where a company has both Directors (with employment contracts) and other members of staff, they must have a pensions scheme set up. The normal workers will have to be auto-enrolled if they qualify. But the company can choose whether or not to auto enrol their Directors. If they choose not to auto enrol the Directors, the Directors still have the right to Opt-in.

More information about defining the work force can be found in the Pension Regulator's  detailed guidance on employer duties and defining the workforce.

Our Fees

At the moment we are not charging an extra ongoing fee, see our current Business Companion Fees.  This may change in the future.

The workload is significant. We do, for example, need to upload a separate payroll file for each client to each pension provider’s website, every month.  We need to be honest and warn that there is even risk that we might make a mistake with the current systems that are available. Please bear with us.

For more information see our February 2018 Newsletter.

Next Step:

Please contact us if you need further advice.


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