With The Pensions Regulator introducing the automatic enrolment in stages from 2012, all employers throughout the UK should now be a part of the scheme. As a business owner, it is your responsibility to ensure your employees are aware of the process and receive the correct contributions.
What is automatic enrolment?
Auto-enrolment is a way of ensuring that your eligible employees are automatically enrolled as a member of the workplace pension scheme. In the past, it was down to the employees to decide if they wanted to opt in, but the roles have now reversed and employees should declare if they wish to opt out, ensuring that workers across the UK receive the chance to build a pension. Contributions will be taken out of employee salaries, and their employers will be required to contribute a percentage on top of this.
Who can be enrolled on the scheme?
There are multiple criteria that you should consider when determining the eligibility of an employee.
- They must work in the UK
- They must be between the ages of 22 and 74
- They must earn greater than £10,000 a year
When should employees be enrolled by?
If you are currently running your business singlehandedly, you will not need to enrol into the workplace pension scheme. Auto-enrolment duties begin from the moment you employ a member of staff. They will need to be assessed to see if they are eligible to join the scheme.
What should be contributed?
The specific amount to be contributed to your employees’ pension scheme is determined by a set of rules decided by The Pensions Regulator. Current rates show that the majority of employers contribute 5%, but this may vary on individual circumstances.
If you fail to contribute to the scheme, you will risk being reported by your staff to The Pensions Regulator who will run an investigation into your workplace contributions, as well as issuing fines and obliging correct repayment to your employees.
Are employees able to opt-out of the scheme?
As an employer, it is classified as illegal to opt your employees out of the pension scheme, as well as influencing their decision. The scheme is created as a highly effective way of kickstarting, or building upon, pensions throughout the UK and with the additional contribution from employers, auto-enrolment can be highly effective. However, if employees wish to opt-out, they are able to within a short timeframe after their auto-enrolment has been certified.
For advice and assistance with setting up an auto-enrolment workplace pension in your business, or for any enquiries in relation to your company, get in touch with our expert chartered accountants at Hammonds today by calling 0203 007 4990.