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Auto Enrolment Workplace Pensions

'Auto Enrolment’ is the Government requirement to get employees into a workplace pension scheme. It is overseen by the Pensions Regulator who boast that they will make unannounced spot checks and issue fines to employers who get it wrong.

Auto enrolment is a complicated process with confusing jargon and can be of little financial benefit for some workers.  We have tried to simplify the process with our simple standard pension scheme. 

We will be happy to support you with your workplace pension and we will be your main contact with the Pensions Regulator. This is just one part of our comprehensive Business Companion Service.

We can help you with all the required steps.

1) Check whether your business is an employer <bookmark link to section below>

2) Set up our Simple Standard Pension Scheme for you, normally with the Peoples Pension.

3) Assess your staff each month for enrolment and contributions as part of payroll service.

4) We will arrange file uploads into your pension scheme for you every month.  Your pension contributions will be taken out by Direct Debit.

5) Draft letters for you to send to new employees about your pension scheme.

6) Advise you when contribution rates or thresholds change.

7) Take you through the re-enrolment process every three years.

8) Complete your Declaration of Compliance and Re-declarations of Compliance with the Pensions Regulator.

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 concentrate their 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
Employer 8% / Employee 0%

2018/19
Employer 5% / Employee 0%

Important 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)

Assessment of Staff for Eligibility

See the Pensions Regulator guidance

Are you 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.

The 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.

Re-enrolment

As our some of our clients set up their workplace pension two or more years ago they need to start thinking about re-enrolment. 

Here are the steps
a) Choose your re-enrolment date - this can be done anytime within a six-month window, which starts three months before the third anniversary of your staging date.  In general we will just stick to the third anniversary!

b) Reassess any Pension Scheme members who have opted out and re-enrol them if they earn above the £833 (the auto enrolment threshold) in the re-enrolment month. Luckily with our employer-only contribution scheme few employees have felt the need to opt out.

c) Write to any employees who have been re-enrolled - and give them the option of opting out again.

d) We will complete the re-declaration of compliance on your behalf with the Pensions Regulator.

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.

Next Step:

Please contact us if you need further advice.

Ask an MYOB accountant

Call us now on 01422 847500


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