Under the Pensions Act 2008, every employer in the UK must put eligible staff into a workplace pension scheme and contribute towards it.
As an employer, did you know that you are legally obliged to re-enrol any eligible employees who have previously left the pensions scheme, cyclically on a three year basis?
Every three years you must carry out re-enrolment to put back in any staff who have left your scheme during that period.
Your pension re-enrolment duties must be carried out approximately three years after your automatic staging date.
Even if you have no staff to re-enrol, you will need to complete a re-declaration of compliance to tell The Pensions Regulator that you have met your duties.
A large majority of employers are now coming up to their three year re-enrolment anniversary, relax and let Cobia Accounting and Payroll take care of this as part of our overall outsourced payroll solution.
- The first step towards a successful re-enrolment involves choosing your re-enrolment date from a six month window. This window will fall three months before your automatic enrolment staging date reaches its three year anniversary and stretch to three months after.
- Assessing your staff on your re-enrolment date comes next. Staff that will need to be re-enrolled will be anyone who meets the following criteria:
- Aged between 22 and the state pension age.
- Meets the statutory requirement of earning over £10,000 a year, £833 a month or £192 a week.
- Employees who have previously opted out of the scheme.
- As the employer you have a few choices to make at this stage
- If an employee is due to leave your employment during the re-enrolment process, it is the employer’s choice whether or not to enrol them back into the scheme.
- The employer would also have to make a decision on whether or not to enrol a director who meets the above criteria back into the scheme.
- Any employees who are due to be re-enrolled back into your scheme must be written to within the same 6 week window for which the re-enrolment takes place.
- Once all of the above has been completed, a re-declaration of compliance will need submitting to the Pensions Regulator.
Most employers are aware and understand their ongoing duties, but a small minority who fail to meet ongoing duties will risk financial penalties.
For the first time that an employer goes through a re-enrolment, they must complete a re-declaration of compliance within five calendar months of the third anniversary of their staging date. For any future re-enrolments, the deadline moves to the third anniversary of their most recent re-enrolment declaration.
A re-declaration of compliance is compulsory and must be completed on time. If this is not adhered to, enforcement action could be taken against the company. The employer will still need to complete a re-declaration even if they had no eligible members of staff to re-enrol. This is so the Pensions Regulator are kept fully up to date with the records.
Employers do not have to wait until the third anniversary of their staging date to re-declare, the Pensions Regulator advises to re-declare as soon as possible to avoid any potential issues ensuring they are solved within a timely manner.
Automatic enrolment is a continuous responsibility – your duties do not end after your duties start date.
Each time you pay your staff you should carry out the following tasks.
- Monitor any age changes and gross earnings of your employees
Throughout the month when updating employee’s payment amounts, some employees may fall above or below the requirement to pay a pension amount for the given month. Careful monitoring of this needs to happen to ensure any eligible employees are added into the scheme where necessary. New starters will need to be thoroughly checked as the postponement period may apply to one new starter but not another based on age or monthly earnings.
- Update any requests to join or leave the scheme
Employees can request to opt in to a pension scheme at any point and it is your responsibility to comply with this. There are a few various ways in which an employee may request to leave a pensions scheme and these can be anything from an email, a paper opt out form from the pension’s provider or online through the providers website. A scheme leaver and an opt out are viewed differently in the eyes of the pension providers. An opt out is for anyone who requests to leave the pension scheme within the first month of their enrolment date. These employees are entitled to a refund of their contributions through the next available payroll. A scheme leaver is then for any employees who request to leave the pension scheme but fall outside of the month window in which they are entitled to a refund.
- Ensure contributions meet the statutory minimum
Most up to date payroll software packages will ensure that the correct percentages are being deducted for both employee and employer. However, when there is a legislation change it is the employer’s responsibility to ensure that the percentages are updated to the statutory minimum. Employees can choose to pay a higher or lower percentage than the statutory, however if they choose to pay less, the scheme is no longer classed as an auto enrolment scheme and differing rules will then apply for that individual.
Sound like a headache? Leave it to our team of payroll experts who are more than happy to help.