Automatic Enrolment and Pensions
After the introduction of the Pension Act 2008, all employers must now provide a qualifying workplace pension scheme to their employees on their Staging Date. This legislation covers all employers in the UK whether or not they are incorporated commercial entities, sole traders, charities or domestic employers.
Every pay period the employer must assess their workforce by age, residency as well as qualifying earning levels, in order to determine their eligibility to be automatically enrolled into a pension scheme.
Qualifying Earnings are pay components defined in the Pension Act 2008 that typically include salary, wages, commission, bonuses, overtime, statutory sick pay, statutory maternity pay, ordinary or additional statutory paternity pay and statutory adoption pay. This total remuneration amount is used to calculate the statutory minimum pension contribution amounts, after the upper and lower earnings limits have been applied.
Pensionable earnings: are used to calculate the actual pension contributions, and can either be the same as Qualifying Earnings or, can be different but then must adhere to Certification Criteria (Tiers 1, 2 or 3.) For further details on Certification click here.
Companies with Existing Schemes
Many existing pension schemes that are not specifically designed as auto enrolment schemes will not be compliant under auto-enrolment. Where a company has a legacy scheme in place, we ask the employer to contact the provider to determine whether or not it is compliant under auto enrolment.
Phasing Auto Enrolment Contributions
Auto enrolment specifies a minimum level that must be paid, increasing from 2% from 2012 to 8% in 2018 – this contribution can be paid in total by the employer, or both the employee and the employer can contribute, but the employer must always contribute the legislated minimum:
|Proposed dates||Employer minimum contribution||Jobholder contribution||Total|
|Up to 5th April 2018||1%||1%||2%|
|6th April 2018 to 5th April 2019||2%||3%||5%|
|6th April 2019 onwards||3%||5%||8%|
The Crystal Trust (https://evolvepensions.co.uk/crystal/) operates a NET PAY ARRANGEMENT treatment for tax, which means that the employee contributions are taken from salary before tax. As the employee is not paying tax on that portion of salary, this is where the tax relief is achieved.
Postponement: You have the option to postpone or defer your contribution date for up to 3 months from your staging date, as well as postponing new starters and newly eligible employees according to your business needs.
Opting in or joining the Pension scheme: If the employee has been assessed as a non-eligible job holder or an entitled worker, they will not be automatically enrolled into the pension scheme, but can choose to Opt In or Join the scheme. An employee can do this by clicking on the Manage My Pension button at the top of the Page.
Opting Out or Ceasing Membership: The employee cannot choose to opt out of the pension scheme before they have been enrolled. Once they have been enrolled and have received notification of this, they can opt out or cease membership by clicking on the Manage My Pension button at the top of the page.
Prime Pay and Tax will work with you to help you to decide the choices best for you, will set up your pension scheme with Evolve Pensions and will provide all employee communication as required by legislation.