Guide to Pension Auto Enrolment

This is an overview of the rules relating to workplace pensions and automatic enrolment. For more comprehensive guidance, please see the website of The Pensions Regulator.

Introduction

If you are an employer with staff working for you in the UK, the rules regarding workplace pensions and automatic enrolment apply to you.

Rules about influencing the behaviour of your employees and screening new recruits apply already, but most of the rules begin on your staging date.

  • You can look up your staging date by entering your PAYE Reference on The Pensions Regulator's website.
  • If your business started after April 2012, your staging date is not before May 2017.

Pension Providers

If you don't yet have a pension scheme, you should choose one before your staging date. The Pensions Regulator's website explains that you should pick a scheme that either has master trust assurance or is regulated by the Financial Conduct Authority. The website also has a list of schemes that are open to small employers.

Once you have enrolled your staff in a pension, you'll need to regularly give information to the pension company. This is different for each pension provider and is explained in Our Guide.

Assessing your workforce

Every pay run, the system will automatically tell you if you need to enrol anyone - See our guide on How to Assess Your Staff.

The workplace pension rules define three categories of workers for whom special actions must be taken. In addition, you may have employees who don't fall into any of these categories - e.g. if they are under 16, aged 75 or above, or they do not work in the UK. Some office-holders are also excluded.

Criteria for 2016/17CategoryMain ActionsAlso Note
Age 22 to State Pension Age, earning over £192/wk or £833/m Eligible Jobholder
  • Enrol them in a qualifying pension.
  • Write to the employee.
  • Make employer contributions.
After being enrolled, the employee can opt-out. For more information, see our Opt-Out Guide.
Age 16-74 inclusive, earning over £112/wk or £486/m and not an Eligible Jobholder Non-Eligible Jobholder
  • Write to the employee.
The employee can opt-in.
Age 16-74 inclusive, earning no more than £112/wk or £486/m Entitled Worker
  • Write to the employee.
The employee can join the pension but you don't have to make employer contributions.

Pay Reference Periods

Each assessment is carried out over a period called a pay reference period, which can be defined in different ways. We've chosen the definition aligned to tax weeks or tax months because it

  • is simple to understand
  • always includes the pay date
  • never crossed tax years (with different earnings bands)

The system uses this definition of pay reference period when assessing your staff and when calculating pension contributions. You may need to tell your pension company this when setting up the pension scheme.

Pension Contributions

For the two Jobholder categories, you can choose a qualifying pension scheme with whichever level of contributions you like, as long as they meet a certain legal minimum. These contributions can be set up on the Pensions etc tab. If you choose a pension scheme with the minimum legal contribution level, there is an option on the Pensions etc tab that automatically calculates the employee and employer contributions.

Tax Relief

Automatic enrolment pensions are typically entitled to tax relief using one of the following methods:

  • Relief at source, where the employee contributions are reduced but this is boosted when the pension company reclaims tax from HMRC
  • Net Pay arrangement, where the PAYE tax is reduced, thereby increasing the net pay

If your pension uses Relief at Source, the option 'Minimum Pension Contribution for Automatic Enrolment (Relief at Source)' will reduce the employee contribution automatically. If you are using Relief at Source with another pension type, you should enter the reduced figure for employee contributions.

If your pension uses the Net Pay arrangement, select 'Occupational Pension Contribution (Net Pay Arrangement)', which automatically reduces the PAYE.

Postponement

You can delay some of your duties using postponement. If you use postponement, you must tell your employees in writing. For more information, see the website of The Pensions Regulator.

Automatic re-enrolment

Every three years, you must look again at anyone who has opted out and assess whether you need to automatically enrol them again. On The Payroll Site, resetting the options on the Pensions etc tab will trigger them to be assessed again.

Keeping records and registering with the regulator

In addition to the above, you must keep records and register with The Pensions Regulator. You can find more information about these obligations on the website of The Pensions Regulator.