Auto Enrolment


NAVIGATING THE NEW WORKPLACE PENSIONS SCHEME

WHAT HAS THE GOVERNMENT CHANGED?
As life expectancy rises and the ratio of workers to retirees falls, the Government has bought in new auto-enrolment pension legislation in an effort to encourage more saving for retirement and help future pensioners to maintain a decent standard of living. Under the new Workplace Pensions Scheme, the legislation means that all businesses need to enrol employees that meet certain age and income thresholds in a workplace pension, by a given date – called a ‘staging date’ – with all preparatory work completed beforehand.

After this date, firms will need to review their employee’s circumstances on a rolling basis, automatically enrolling them if their income or age rises above the minimum necessary threshold for auto enrolling and processing opt in or opt out requests. Some workers on low incomes will not be automatically enrolled, but many will be able to opt in. Companies will also need to keep each individual employee informed of his or her individual auto enrolment pension situation.

WHAT DOES IT MEAN FOR BUSINESSES?
There are significant one-off regulatory hurdles for businesses when dealing with the new legislation and ensuring that they comply, which includes rolling administration requirements. These regulatory and administration costs are expected to impose a significant burden on businesses. In fact, many businesses may be forced to hire at least one new member of staff to handle the auto enrolment process – both the set-up and its ongoing requirements – or turn to external help for support.

The employer is responsible for choosing a pension provider for their employees and UK workers will eventually contribute up to 5 percent of their eligible wages into a workplace pension and their employer will eventually contribute at least 3 percent. Initial contributions, shortly after the scheme becomes active for a given business, will be somewhat lower. Different sized firms and their employees will build up to these limits gradually and at different times.

WHAT IS THE SET UP PROCEDURE?
To effectively comply for the first phase businesses should:

• Know their staging date and auto enrolment process
• Nominate a point of contact
• Develop a pension plan
• Construct the designated communications
• Liaise with payroll provider
• Put in place adequate business processes
• Choose a pension scheme for auto enrolment funds
• Set-up pension scheme / liaise with pension provider
• Classify workers into categories
• Auto enrol eligible employees
• Process opt outs, opt ins and joining requests, and process automatic re-enrolment after three years
• Address staff queries about auto enrolment
• Register with the Pensions Regulator
• Keep auditable records
• Keep up with new auto enrolment rules and procedures

The estimated one-off time burden for this is approximately 20 days*.

WHAT IS THE ROLLING PROCEDURE?
On a monthly basis businesses need to:

• Liaise with Pension Provider
• Classify workers into categories
• Auto enrol eligible employees
• Process opt outs, opt ins and joining requests and process automatic re-enrolment after three years
• Address staff queries about auto enrolment
• Keep auditable records
• Keep up with new auto enrolment rules and procedures

The estimated monthly time burden for this is approximately 12 hours*.