Changes to Pension Law for UK Employers:

As you may already be aware, the law on UK workplace pensions has changed in October 2012. Every UK employer with at least one member of staff now has new legal duties, including enrolling staff who are eligible into a workplace pension scheme and making employer contributions towards it. The system is called automatic enrolment. It is called ''automatic enrolment'' as your staff will be automatically enrolled into the pension scheme.

Your Responsibilities:
As the employer, you are ultimately responsible for ensuring that you meet your statutory duties with regards to auto enrolment and the pension reform. It is important that you understand your responsibilities and are aware of the costs of compliance that this additional burden will bring, both in terms of pension contributions and administrative costs. The initial steps that you need to take are as follows:

1. Duties Start Date: 

Employers have had the legal duty since 1st October 2017 to enrol any new employee into a pension scheme from the very first day they commence work. This is known as the Duties Start Date.

2. Nominate a Contact:
If you have not already done so, the first thing you must do upon receiving a letter from The Pensions Regulator is to ''nominate a contact'' to receive email communications.
You will need the Letter Code and PAYE reference shown on the letter that you have received from The Pensions Regulator.

3. Choose a Qualifying Pension Scheme:
Employers are able to choose the pension scheme that they want to provide, as long as it meets certain criteria, such as meeting the minimum level of contribution and automatically enrolling all eligible employees. If you have an existing pension scheme in place, you will need to check with your pension provider or an IFA that the scheme meets the qualifying conditions for auto enrolment.
NEST (National Employment Savings Trust) - www.nestpensions.org.uk
NEST is the workplace pension set up by the government specifically for auto enrolment. It is open to employers of any size and is designed to meet the needs of people who are largely new to pension saving. NEST is our preferred pension provider as they offer a scheme, which is free of administration fees for employers and low cost for employees. Other alternative private pension providers are available.

4. Assessing your workforce:
At your staging date and then at every pay date, you will need to identify which members of staff to automatically enrol and which will have a right to join your pension scheme on request.
All businesses must automatically enrol all employees who are:
• Aged over 22

• Work in the UK

• Under the state pension age

• Earn over £10,000 a year

Workers who earn less than £10,000 can ask to be enrolled if they want to and, if they earn more than £6,240 (qualifying earnings), their employer will be obliged to make a contribution too. These rates are correct for the 2023/24 tax year. Those aged under 22, or over state pension age and still working, can also opt-in in the same way.

5. Contribution Rates:
The minimum contribution rate is currently 8%, made up of at least 3% from the employer, up to 5% from the employee, 1% of this paid by HMRC as basic rate tax relief.
It’s important to note that you can choose to pay contributions on the employee’s pensionable pay ( Qualifying Earnings) between £6,240 and £50,270 for the 2023/24 tax year and not on the employee’s total earnings. These figures are reviewed annually.
NEST information on qualifying earnings: 

https://www.nestpensions.org.uk/schemeweb/helpcentre/contributions/calculating-contributions/calculate-contributions-using-qualifying-earnings.html

6. Opting Out:
‘Opting out’ is when a staff member decides to leave your pension scheme within a month of being enrolled. Staff you have automatically enrolled and those who have opted in can choose to opt out.

Pension Regulator: http://www.thepensionsregulator.gov.uk/opting-out.aspx

7. Postponement Period (3 months):

Employers can postpone automatic enrolment from:

- The date their legal duties started.

- A staff member's first day of employment.

- The date a staff member first becomes eligible for automatic enrolment.

- Postponement will not change the date the duties apply from.

- Employers can only use postponement if they are within six weeks of the date they became eligible for automatic enrolment.

Pension Regulator: http://www.thepensionsregulator.gov.uk/postponement.aspx

8. Limited Companies Automatic Enrolment Duties:

Pension Regulator: http://help.thepensionsregulator.gov.uk/faq/

9. Declaration of compliance:

As a final stage of your auto enrolment, the Declaration of compliance must be completed on the Pension Regulator website to confirm that you have met your legal duties for automatic enrolment and re-enrolment.

Pension Regulator: https://www.autoenrol.tpr.gov.uk/TPRGateway/Home

10. Re-enrolment:

Your re-enrolment duties must be carried out approximately three years after your automatic enrolment staging date. Your duties will vary depending on whether you identify that you have staff to re-enrol, or whether you have no staff to re-enrol. You will need to complete a re-declaration of compliance to confirm that you have met your re-enrolment duties.

Pension Regulator: https://www.thepensionsregulator.gov.uk/en/employers/re-enrolment

11. Penalties for non-compliance:

If you fail to comply with your employer duties, The Pensions Regulator may take enforcement action and issue a notice and / or a penalty, which could start at £400. There are also daily penalties depending on the number of workers you employ, which range from £50 to £2,500 per day.