What is Auto Enrolment?

Auto enrolment is the Government’s approach to the growing pension problem in the UK. Previous attempts of encouragement have now been abandoned and replaced by the Government’s compulsory programme of ‘automatic enrolment’ into a pension scheme. Every employer has been given a ‘staging date’. This is the date an employer’s auto enrolment duties come into effect.

What’s it all about?

Employees are reluctant to pay towards their own pensions and employers have been put off by the costs involved in setting up a pension scheme for them. Now employers have no choice, the Government is forcing them to establish pension schemes so that employees are compelled to save for their retirement. Even those employers that already have pension schemes must check that they meet the minimum requirements of auto enrolment.

Logistics...

You need to undertake the following:
  • Start you declaration of compliance
  • Establish your staging date
  • Assess your workforce
  • Tell each of them into which category they fall (see later)
  • Find a suitable pension scheme
  • Auto enrol the eligible members on the staging date
  • Tell the non-eligible and entitled workers what it means to them and why
  • Provide information
  • Keep records
  • Collect contributions
  • Submit your declaration of compliance

Who does this affect?

As an employer, you are mainly interested in those who are eligible for auto enrolment, as follows (in respect of this fiscal year)

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For automatic enrolment, employees fall into three categories depending on age and salary. Employees who already belong to a qualifying workplace pension scheme are not eligible for automatic enrolment.

Here’s a table to show which category each could fall into:

EarningsAge
16 - 2122 - State pension ageState pension age - 74
Less than or equal to £5,824Entitled worker
Over £5,824 and up to £10,000Non-eligible jobholder
£10,000+Non-eligible jobholderEligible jobholderNon-eligible jobholder
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What do the categories mean?

Eligible jobholder

Eligible jobholders will be automatically enrolled into their workplace pension scheme, whether they want to be or not. Employers must pay towards their scheme.

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Non-eligible jobholder

Non-eligible jobholders will not be automatically enrolled into the pension scheme but can ask to join.

If they opt to join then they will benefit from contributions from the employer. There is a minimum contribution that must be made.

Entitled workers

Entitled workers will not be automatically enrolled into the pension scheme but can apply to join.

The employer must contact them to give them the opportunity to join, but the employer is not obliged to contribute on their behalf.

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How much do we have to pay?

The amount that has to be contributed to a pension scheme is determined by its rules. However, if the scheme is being used for auto enrolment there are minimum contributions that must be paid.

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The minimum contributions are shown in the table below. Currently the total minimum contribution is 2% with at least 1% being the employer’s contribution. The percentages are based on the earnings of the employee and, depending on the pension scheme’s rules; they may or may not take into account bonus or overtime payments.

Minimum contributions are being introduced gradually, increasing over time.

DateEmployer minimum contributionTotal minimum contribution
Employer's staging date to *05/04/181%2% (including 1% staff contribution)
*06/04/18 — *05/04/192%5% (including 3% staff contribution)
*06/04/19 onwards3%8% (including 5% staff contribution)

*The proposed dates are subject to Parliament approval

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