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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 it’s not automatic for you. You will need to take steps to make sure they’re enrolled by your 'Staging Date', or you can use the postponement option and delay the start of auto enrolment by up to three months.

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 your circumstances change.

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.

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 (may change next year);
•    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.

The Details of our 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.  Then the autoenrolment will not be contested by the staff.  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 even saves a little Employer National Insurance!  

This recommendation is for Eligible and Non-Eligible workers only.  As 'Entitled' workers are not entitled (!) to employer contributions we recommend those that 'opted in' were set up for employee contributions only.

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:

Eligible 2% / 0%
Non Eligible 2% / 0%
Entitled 0% / 2%

Eligible 5% / 0%
Non Eligible 5% / 0%
Entitled 0% / 5%

Note: Contribution rates are calculated as 2% of 'Banded Qualifying Earnings' only : the band of earnings between £490 and £3,750 per month.

Additional Contributions
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.

Pensions Provider - The Peoples Pension
Our final proposal is to recommend The Peoples Pension (PP).  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 method of uploading the calculations from our payroll software to their portal is no more ludicrously time-consuming than other pension providers we have tested (exactly like Now Pensions, NEST, et al).

One concrete problem that we have had resolved with the Peoples Pension is that their defaults did not allow for the enrolment of an Entitled worker at a zero employer contribution (and which appeared contrary to the regulations).  But since talking to Amany at PP we have managed to get them to rectify their system. For new payrolls, the PP charge a £300 setup fee...which you normally have to pay. We have negotiated a fee-free exception to this fee for our Business Companion clients who are moving from other providers. 

We do not intend to use the PP calculations as the basis of the contributions.  We are using our payroll package to do this.

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.

There is no obligation on you to use this choice.  However we cannot provide cheap support for more than one pension provider.  The reason is the software involved.  The method of transmitting the salaries and deduction calculations from even mainstream payroll packages to the Pension Provider (in our case PP), is staggeringly basic.  The government and the regulator have not insisted on software accepting multiple batch processing from payroll agents like ourselves.  Instead we have to download deductions information employer by employer, using a format within the payroll software which is peculiar to each pension provider.  Then we have to upload each separate text file employer by employer to each Pension provider we use.  Clearly this job will be easier if we only use one Pension provider.  If you do not wish to use PP, you will have to administer this yourself.

In our assessment we can just about handle the enrolments and the calculations, the creation of each Pension scheme and the registration with the Pensions Regulator.  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. We do have to pass on to you the one-off £300 fee that the People's Pension charge us to set up each employer.

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 on 01422 847500Call us now on 01422 847500

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