An Employers Guide to Pension Schemes

written by Business Beetle

Under the Pensions Act 2008, every employer in the UK must place eligible staff into a workplace pension and make suitable contributions. This is called ‘automatic enrolment’. If you have one member of staff, you are an employer, and you have a legal obligation to place employees into a workplace pension. To be eligible, employees must be earning over £10,000 a year and be over the age of 22.

If you’re a small business owner and you’ve only just employed your first member of staff, your legal obligations for automatic enrolment begin on the employees first day of work. Whether you’ve not yet made the choice to expand your workforce but think that it could be a possibility in the future, preparing yourself now in anticipation for this is a foolproof way to make sure that you are prepared to execute your legal obligations as an employer when the time comes.

It’s also incredibly important to remember that all employers are obligated to complete a Declaration of Compliance to notify The Pensions Regulator how they have met their legal duties for automatic enrolment. Failing to do this can result in penalties or legal action.

If you are an employer and are late to comply, or don’t comply at all, you could face heavy penalty notices. Late compliance will also result in an employer having to backpay what they owe to employees from the date of eligibility. Not just that, but failure to comply can also result in prosecution if your legal obligations are not met.

Remember, that as an employer, you also have ongoing duties. This includes monitoring the ages of staff and the amount they are annually paid. As soon as any additional members of staff become eligible, you must enroll them into a pension scheme and notify them in writing within six weeks of their eligibility date. Employees are entitled to opt out if they wish to do so following their automatic enrolment. However, an employer is not permitted to deter their employees from being opted into a pension scheme, and employers must not offer alternative incentives. Failure to comply with your obligations will result in financial penalties.

As an employer, you also have obligations to record certain information. Employers must keep records of the following:

  • The names and addresses of those enrolled into a pension scheme
  • Records that demonstrate the monetary contributions that have been made
  • Any requests to join or leave the pension scheme
  • Your pension scheme reference or registry number

All records must be kept for a minimum of six years, except for any opt out requests in which records must be kept for 4 years.

It’s also important to remember that employees are also entitled to request to be enrolled into a pension scheme. They must do so in writing and employers must honour these requests and enroll these employees within one month of receiving their request.

Employers also have an obligation to ensure that every three years, they re-enroll any members of staff who are eligible and have previously opted out of your pension scheme. Whether you do or don’t have members of staff to re-enroll, employers are still obligated to complete a re-declaration of compliance to notify The Pensions Regulator how they have met their duties. Re-enrolment and re-declaration is an employers’ legal obligation and failing to comply can result in financial penalties.

For more information and guidance for making sure that you are meeting your legal obligations as an employer, The Pensions Regulator’s essential guide to Auto-enrolment can be found here:

http://www.thepensionsregulator.gov.uk/the-essential-guide-for-automatic-enrolment-Oct17.pdf

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