Pension Automatic Enrolment
The introduction of the Government’s Pensions Auto-Enrolment legislation has increased awareness of workplace retirement schemes. Under this scheme, employers must automatically enroll their employees in a pension scheme and make contributions on their behalf – unless they are already registered on another company pension arrangement.
Employers who do not comply with these requirements can be fined up to £400 per employee each year.
Do you wanna know why?
The scheme’s introduction has raised awareness among employees about their rights and entitlements, but there is still a lot of confusion over how it works. This article will explain what you need to know if you are an employee or employer regarding workplace pension schemes.
How Do You Qualify For Pensions Auto-Enrolment Legislation?
So here we go:
For an employee to be enrolled into a workplace retirement scheme under Pensions Auto-Enrolment legislation, they must meet specific criteria:
- Are aged between 22 and State Pension Age;
- Earn more than £970 per month (in 2018/19);
- Work in the UK on average at least 30 hours per week; and
- Be working continuously throughout the three months before enrolling. If any one of these criteria is not met, then they will be automatically opted out.
The latter can mean that employees may lose the chance of a workplace pension altogether if they ignore your obligations as an employer and are found guilty of non-compliance with Pensions Auto Enrolment legislation.
- Non-compliance could include:
- Not meeting any qualifying earnings threshold; or
- Not completing any qualifying hours;
Failing to include enough employees in the scheme or including people who have no good reason for opting out.
It is now an employer’s responsibility to pay attention and take care of your legal obligations regarding workplace pension legislation – failing to do so could lead to hefty fines and penalties imposed on you as the employer. Penalties can be up to £900 per employee (or more). On top of that, there will also be a 20% surcharge if you are found guilty of late enrolment or enrolling someone without their permission – meaning even tougher financial implications for not taking action sooner.
To Whom Does the Workplace Pension Law Apply?
This law applies to any employer with over a certain number of employees, and there are two main things you need to know. It would help if you made sure that an occupational pension scheme is in place for your employee. The threshold for this varies depending on whether or not the company already operates one.
But if they do, it’s usually under 50 staff members – so most companies will have more than enough people enrolled on their workplace pensions. The critical thing to remember here is that as soon as you employ anyone new after 25th May 2018, then from day one onwards, they should be automatically included in your Workplace Pension Scheme1 (or any other pension scheme you have in place).
Here’s the truth:
The law is not just about getting your employees enrolled into a workplace pension; it’s also about making sure that they are aware of the different options available to them and giving them access to these choices. And this information must be provided before they make an active decision (i.e. by choosing their retirement date or activating their benefits) because if any changes happen after then, like retiring earlier than planned, for example, then there could be implications on how much money should go into their account each year.
How Much Do Employers and Employees Need to Contribute?
This will depend on what type of pension scheme your employees are enrolled in.
Let me explain:
For example, it may be a compulsory or voluntary scheme, and the contribution rate could vary depending on these factors. If you’re unsure how much needs to be contributed, employers should speak to their pension provider to provide more details.
An employer’s amount is not always based on salary because there is usually a cap, which means that the contributions will reduce if someone earns more money.
Employees can also change their contribution scheme by contacting their pension provider, but any changes that need to be made should happen before the start of a new tax year, so people don’t end up paying too much or too little in total for the year.
How Do I Know If I’m Eligible for a Workplace Pension?
If you work for a company, they will be required by law to provide a plan. Private companies have different rules and regulations regarding how much needs to be contributed, but employees should speak with their employer for more information about these details.
Public sector employers are responsible for contributing at least two-thirds of the contributions into any workplace pensions scheme. This means that if someone earns £20 per week on average, then an employer in the public sector will be required to contribute £13.33 per week into their pension scheme.
Suppose someone has a job that is not in either of these sectors. In that case, they are likely to have an option available to get access to a workplace pension plan through another company or organization such as AARP (Ameriprise Financial2). The latter offers pension plans and payments on behalf of employers so people can save up for retirement.
As long as you don’t work more than 16 hours per week, there’s no requirement from the government for your employer to provide financial advice towards any pension pot. Still, if they do, it would need to meet specific standards set out by law which should be considered.
There are several different types of pension schemes available to people looking for payment in retirement, some of which would cover the cost entirely. In contrast, others might not have that same level of coverage, and so you should fully understand what is being offered before deciding which option will work best.
Got Questions? Check These First
What are my legal responsibilities under workplace pensions?
Under the law, all employers must put in a minimum contribution of £194 per year for their staff. This is worth about 12% of salary, and it’s a legal requirement that must be met every month. Employees have some responsibilities under workplace pensions, too – they need to contribute at least 0.75% if they’re earning over the threshold amount (£11,850) or up to 100% depending on how much earnings go over this figure each year (maximum contributions reached by 2020).
How can I find out what my legal responsibilities are?
You might want to contact your HR department at work to make sure you’re up-to-date on this information before the end of May 2018. You’ll also want to get in touch with your employee’s HR department.
When did workplace pensions become law?
The UK government introduced the law in 2012 to tackle pension inequality.
In 2013, all employers with staff earning less than £15,000 a year were given until April 2019 to start contributing or face heavy fines.
This deadline is now set for 2020 and applies if they come under auto-enrolment regulations, meaning employees will have already been enrolled into workplace pensions without their employer needs to do anything more about it.
What will happen if I don't abide by workplace pensions law?
If you’re not complying with pension laws, then you could face heavy fines at a later date. For example, employers who automatically enrol staff into their schemes without meeting legal requirements now face £500 per worker for failing to comply. More than 300 companies have already been fined since 2013.
The new workplace pension law will be beneficial for employees and employers, but it is essential to take some time before the change takes effect. Employees should talk with their employer about making adjustments to comply with this law by 2020 (or sooner). Employers need to know that changes are coming so they can plan accordingly.