What you need to know about workplace pensions

Here you’ll find the key facts about auto enrolment broken down into bite size chunks.

We want to help you get a better understanding of what you need to do to fulfil your employer duties.  Choose if you are new to workplace pensions or if you’ve been up and running for a while:

New employer

Auto enrolment was introduced in 2012, as a government initiative. It makes it compulsory for employers to enroll certain employees into a workplace pension. The employer must also make a contribution to the scheme.

You’ll need to know your automatic enrolment start date, make sure you have a PAYE number from HRMC, and a UK bank account for the business.

  • You'll need to assess your workforce to determine whether they're treated as a 'worker'. There are three different categories of worker, determined by their age and how much they earn.
  • Eligible jobholders - must be automatically enrolled into an auto enrolment scheme
  • Non-eligible jobholders - have the right to opt-in to an auto enrolment scheme
  • Entitled workers - have the right to join a pension scheme

The table below shows you how to identify each type of worker:

1 These figures are for the 2018/19 tax year.

You can find out more about this and assessing your workforce in our identifying workers factsheet

You may also be able to use postponement which postpones the assessment of the worker until the end of the waiting period of up to three months. You can find out more in our postponement factsheet.

Your employer duties will depend on the types of worker you employ. You'll need to automatically enrol some workers into a pension scheme and arrange membership for others. You're also responsible for the ongoing maintenance of the scheme and have an obligation to keep certain records.

The table below summarises your employer duties for each type of worker.

Category of workerAn overview of your employer duties
Eligible jobholder
  • Automatically enrol them into an auto enrolment scheme.
  • Deduct contributions from their salary and make contributions on their behalf.
  • Process any opt-out notices and refund any contributions paid.
  • Roughly every three years re-enrol those who have previously opted out, stopped making contributions or ceased membership more than 12 months before each re-enrolment date.
  • Keep records of the auto enrolment and opting out processes and provide them to The Pensions Regulator (TPR) if requested.
Non-eligible jobholder
  • Provide information about their right to opt-in to an auto enrolment scheme.
  • Arrange pension scheme membership.
  • Deduct contributions from their salary and make contributions on their behalf.
  • Process any opt-out notices and refund any contributions paid.
  • Continually assess their age and/or earnings.
  • Keep records of the enrolment, opting in and opting out processes and provide them to TPR if requested.
Entitled worker
  • Provide information about their right to join a pension scheme.
  • Arrange pension scheme membership.
  • Deduct contributions from their salary and pay these into the scheme. You're not required to make contributions although you can choose to do so.
  • Continually assess their age and/or earnings
  • Keep records of the joining process and provide them to TPR if requested.

The government recognised that the introduction of auto enrolment would create new costs and administrative requirements for employers. They introduced phasing of contributions to help employers spread the cost.  Up until April 2019, you can build up contributions. There are four options to meet the quality requirements.

You can find out more in our phasing of contributions factsheet.

You'll need to keep records of how you've met and continue to meet your employer duties. This includes information about your workers and the pension scheme which must be provided to TPR when requested.

You can use electronic or paper-filing systems to store records and can use your existing business documentation, such as payroll records, to meet the requirements.

You can also authorise a 3rd party to keep records on your behalf, although you'll have legal responsibility to ensure records are kept and provide them to The Pensions Regulator (TPR) when requested.

Records you must keep about your workers

Who the record relates toWhat record must be keptHow long it must be kept
Jobholders and workers who become members
  • Name
  • National Insurance number (where one exists)
  • Date of birth
  • Gross qualifying earnings in each relevant pay reference period1
  • The contributions payable in each relevant pay reference period by an employer to the scheme, and the amount payable. This includes contributions due on the employer's behalf and deductions made from earnings.
  • The date contributions were made to the scheme
6 years
Additional information for jobholders only
  • Auto enrolment date
  • Opt-in notice in original format or electronic version
  • The contributions to which the jobholder is entitled to under the scheme rules (this demonstrates that the scheme being used is a qualifying scheme)
6 years
  • Opt-out notice in original format or electronic version
4 years
Additional information for workers only
  • Date with effect from which the worker became an active member
  • Joining notice in original format or electronic version
6 years
All workers for whom postponement has been used
  • Name
  • National Insurance number (where one exists)
  • Date the notice was sent to the worker

1 You can find further information on pay reference periods in the Detailed guidance no 3 - Assessing the workforce.

Records you must keep about the pension scheme

Type of pension scheme being usedWhat record must be keptHow long it must be kept
Defined contribution (DC), defined benefit (DB) or hybrid scheme
  1. Employer pension scheme reference
  2. Scheme name and address
  3. Scheme contracting-out certificate (this applies to contracted-out DB schemes only)
  4. Any evidence showing that a scheme meets the test scheme standard2 (this applies to non-contracted-out DB schemes only)
  5. Non-UK administered schemes must keep:
    • the address of the scheme
    • name of the authority which carries out functions that correspond to those of the regulator in the country where the scheme is based
6 years
Personal pension scheme
  1. Employer pension scheme reference
  2. Name and address of the pension provider
  3. Non-UK administered schemes must keep:
    • the address of the scheme
    • name of the authority which carries out functions that correspond to those of the regulator in the country where the scheme is based
DC scheme, where the employer is certifying that a quality or alternative requirement is satisfied
  1. The certificate and any data/evidence relating to it
  2. The certificate generated through the employer dashboard
6 years after the end of the certification period

The employer duties are not optional and TPR will be responsible for ensuring that you comply. Although their approach will be to educate and encourage compliance, you'll face substantial fines or even imprisonment if you don't comply.

The TPR will impose penalties if you don’t comply with your employer duties:

  • Compliance/ unpaid contributions notice – This will detail the breach, what you need to do to put things right and the timescale you have to do it. It may also include a requirement to make backdated contributions with interest added.
  • Fixed penalty notice - £400 - This will outline what you need to do to put things right and you’ll be given at least 4 weeks from the date of the fixed penalty notice to do this. The penalty will be applied if the breach isn't corrected by the specified date.
  • Escalating penalty notice – You could face daily escalating penalties in addition to any fixed penalty if you fail to comply.

Other penalties:

The TPR can impose three other types of penalties if you’re found to be guilty of:

  • Willful failure to comply - If you wilfully fail to comply with your employer duties, you'll face fines and/or up to two years' imprisonment.
  • Inducement - If you induce workers not to join or to opt-out of a pension scheme, you may have fixed and/or escalating penalties imposed.
  • Prohibited Recruitment Conduct - You’re not allowed to make any statement or ask any question during the recruitment process, which indicates (either explicitly or implicitly) that the worker may not join or may opt-out of a pension scheme. Separate penalties apply if you use prohibited recruitment conduct.

You have the right to appeal against any penalties imposted by TPR and must do so in writing.

Every three years you must re-enrol certain workers into your qualifying pension scheme. You al so need to re-declare compliance with TPR. This process is called cylical re-enrolment. The cylical re-enrolment and auto enrolment processes are mostly the same.

Find out more in our about cyclical re-enrolment factsheet, or in our full guide to cylical re-enrolment.

You may have heard about NEST, the National Employment Savings Trust. NEST is a pension scheme that is primarily aimed at low to medium earners and small employers that don't have access to a company pension scheme.

It's designed to be a simple, low cost option and there are certain restrictions that apply.

  • There is currently a general ban on transfers in or out.
  • There is currently an upper contribution limit.

Workers will be automatically invested in a default fund based on time to retirement. This will not take into account an individual's attitude to risk.

Existing employer

  • You'll need to assess your workforce to determine whether they're treated as a 'worker'. There are three different categories of worker, determined by their age and how much they earn.
  • Eligible jobholders - must be automatically enrolled into an auto enrolment scheme
  • Non-eligible jobholders - have the right to opt-in to an auto enrolment scheme
  • Entitled workers - have the right to join a pension scheme

The table below shows you how to identify each type of worker:

1 These figures are for the 2018/19 tax year.

 

You can find out more about this and assessing your workforce in our identifying workers factsheet

You may also be able to use postponement which postpones the assessment of the worker until the end of the waiting period of up to three months. You can find out more in our postponement factsheet.

Your employer duties will depend on the types of worker you employ. You'll need to automatically enrol some workers into a pension scheme and arrange membership for others. You're also responsible for the ongoing maintenance of the scheme and have an obligation to keep certain records.

The table below summarises your employer duties for each type of worker.

Category of workerAn overview of your employer duties
Eligible jobholder
  • Automatically enrol them into an auto enrolment scheme.
  • Deduct contributions from their salary and make contributions on their behalf.
  • Process any opt-out notices and refund any contributions paid.
  • Roughly every three years re-enrol those who have previously opted out, stopped making contributions or ceased membership more than 12 months before each re-enrolment date.
  • Keep records of the auto enrolment and opting out processes and provide them to The Pensions Regulator (TPR) if requested.
Non-eligible jobholder
  • Provide information about their right to opt-in to an auto enrolment scheme.
  • Arrange pension scheme membership.
  • Deduct contributions from their salary and make contributions on their behalf.
  • Process any opt-out notices and refund any contributions paid.
  • Continually assess their age and/or earnings.
  • Keep records of the enrolment, opting in and opting out processes and provide them to TPR if requested.
Entitled worker
  • Provide information about their right to join a pension scheme.
  • Arrange pension scheme membership.
  • Deduct contributions from their salary and pay these into the scheme. You're not required to make contributions although you can choose to do so.
  • Continually assess their age and/or earnings
  • Keep records of the joining process and provide them to TPR if requested.

The government recognised that the introduction of auto enrolment would create new costs and administrative requirements for employers. They introduced phasing of contributions to help employers spread the cost.  Up until April 2019, you can build up contributions. There are four options to meet the quality requirements.

You can find out more in our phasing of contributions factsheet.

You'll need to keep records of how you've met and continue to meet your employer duties. This includes information about your workers and the pension scheme which must be provided to TPR when requested.

You can use electronic or paper-filing systems to store records and can use your existing business documentation, such as payroll records, to meet the requirements.

You can also authorise a 3rd party to keep records on your behalf, although you'll have legal responsibility to ensure records are kept and provide them to The Pensions Regulator (TPR) when requested.

Records you must keep about your workers

Who the record relates toWhat record must be keptHow long it must be kept
Jobholders and workers who become members
  • Name
  • National Insurance number (where one exists)
  • Date of birth
  • Gross qualifying earnings in each relevant pay reference period1
  • The contributions payable in each relevant pay reference period by an employer to the scheme, and the amount payable. This includes contributions due on the employer's behalf and deductions made from earnings.
  • The date contributions were made to the scheme
6 years
Additional information for jobholders only
  • Auto enrolment date
  • Opt-in notice in original format or electronic version
  • The contributions to which the jobholder is entitled to under the scheme rules (this demonstrates that the scheme being used is a qualifying scheme)
6 years
  • Opt-out notice in original format or electronic version
4 years
Additional information for workers only
  • Date with effect from which the worker became an active member
  • Joining notice in original format or electronic version
6 years
All workers for whom postponement has been used
  • Name
  • National Insurance number (where one exists)
  • Date the notice was sent to the worker

1 You can find further information on pay reference periods on the Pensions Regulator website.

Records you must keep about the pension scheme

Type of pension scheme being usedWhat record must be keptHow long it must be kept
Defined contribution (DC), defined benefit (DB) or hybrid scheme
  1. Employer pension scheme reference
  2. Scheme name and address
  3. Scheme contracting-out certificate (this applies to contracted-out DB schemes only)
  4. Any evidence showing that a scheme meets the test scheme standard2 (this applies to non-contracted-out DB schemes only)
  5. Non-UK administered schemes must keep:
    • the address of the scheme
    • name of the authority which carries out functions that correspond to those of the regulator in the country where the scheme is based
6 years
Personal pension scheme
  1. Employer pension scheme reference
  2. Name and address of the pension provider
  3. Non-UK administered schemes must keep:
    • the address of the scheme
    • name of the authority which carries out functions that correspond to those of the regulator in the country where the scheme is based
DC scheme, where the employer is certifying that a quality or alternative requirement is satisfied
  1. The certificate and any data/evidence relating to it
  2. The certificate generated through the employer dashboard
6 years after the end of the certification period

The employer duties are not optional and TPR will be responsible for ensuring that you comply. Although their approach will be to educate and encourage compliance, you'll face substantial fines or even imprisonment if you don't comply.

The TPR will impose penalties if you don’t comply with your employer duties:

  • Compliance/ unpaid contributions notice – This will detail the breach, what you need to do to put things right and the timescale you have to do it. It may also include a requirement to make backdated contributions with interest added.
  • Fixed penalty notice - £400 - This will outline what you need to do to put things right and you’ll be given at least 4 weeks from the date of the fixed penalty notice to do this. The penalty will be applied if the breach isn't corrected by the specified date.
  • Escalating penalty notice – You could face daily escalating penalties in addition to any fixed penalty if you fail to comply.

Other penalties:

The TPR can impose three other types of penalties if you’re found to be guilty of:

  • Willful failure to comply - If you wilfully fail to comply with your employer duties, you'll face fines and/or up to two years' imprisonment.
  • Inducement - If you induce workers not to join or to opt-out of a pension scheme, you may have fixed and/or escalating penalties imposed.
  • Prohibited Recruitment Conduct - You’re not allowed to make any statement or ask any question during the recruitment process, which indicates (either explicitly or implicitly) that the worker may not join or may opt-out of a pension scheme. Separate penalties apply if you use prohibited recruitment conduct.

You have the right to appeal against any penalties imposted by TPR and must do so in writing.

Every three years you must re-enrol certain workers into your qualifying pension scheme. You al so need to re-declare compliance with TPR. This process is called cylical re-enrolment. The cylical re-enrolment and auto enrolment processes are mostly the same.

Find out more in our about cyclical re-enrolment factsheet, or in our full guide to cylical re-enrolment.

The Royal London Mutual Insurance Society Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Registered in England and Wales number 99064. Registered office: 55 Gracechurch Street, London EC3V 0RL.