Pension auto enrolment - what you need to know

One of your key employer duties is checking which employees should be automatically enrolled in your workplace pension scheme. Your duties then depend on whether they're an eligible, non-eligible jobholder or an entitled worker.

Eligible jobholders:

• earn over £10,000 a year
• be aged between 22 and their State Pension age (opens in a new window)
• working in the UK.

You must automatically enrol eligible jobholders into your scheme and you're required to contribute to their retirement.

Non-eligible jobholders:

• earn over £10,000 a year
• are aged between 16 and 21 or between State Pension age (opens in a new window) and 74
• working in the UK

or

• earn less than £10,000 a year but more than £6,240
• are aged between 16 and 74
• and are working in the UK.

If a non-eligible Jobholder asks to join your scheme, you must enrol them and pay regular employer contributions.

Entitled workers:

• earn less than £6,240
• be aged between 16 and 74
• working in the UK.

If an entitled worker asked to join your scheme you must enrol them but you aren't legally required to contribute to their pension.

Employees automatically enrolled have one month to opt out and receive a refund of contributions. After that, they can leave the scheme anytime, but contributions already paid stay invested. Employers must process opt-out notices and keep records for six years.

The legal minimum contribution to a workplace pension is 8% of an employee's qualifying earnings. As an employer, you're required to contribute at least 3% but you can pay more if you want to. If you only pay the minimum then your employee must contribute the additional 5% to meet the 8% minimum.

As 8% of qualifying earnings can be difficult for employers to administer, you can choose an alternative total minimum contribution basis of 7%, 8% or 9%.

To find out more about these alternative minimum contributions you can visit our guide to pensionable earnings. If you're not sure which minimum contribution level is right for your scheme, please speak to a financial adviser.

Your employees will receive tax relief on their pension contributions, if eligible.

If your scheme is set up on a salary exchange arrangement both you and your employees will benefit from paying less National Insurance contributions (NIC). You can find out more about using salary exchange in our guide to salary exchange contributions.

Once you have employees enrolled in your scheme you'll need to start paying contributions into their workplace pension no later than the first payday after you duties start date.

This includes your employer contribution and your employee's contribution, which you'll need to calculate and deduct from each of your eligible employees salaries.

You'll also need to provide the pensionable earnings information each month. As part of your pension provider's ongoing duties, they'll need to check the contributions you make against are in line with the way your plans in your pension scheme has been set up. This is called contribution monitoring. 

Remember to comply with the pensions regulation you must make sure that contributions deducted from the pay are received by your pension provider no later than the 22nd of the next month.

You're required to keep formal records on your employees and the decisions you've made in the set up and ongoing administration of your scheme as The Pensions Regulator may ask to see them. They must be kept for at least six years or, for employees who opt out of your pension scheme, four years. Your records should include the following details:

Employee records:

• Name
• National Insurance number
• Date of birth
• Gross qualifying earnings (where applicable)
• Contributions paid
• Opt-in/opt-out notices and joining notices

Pension scheme records:

• Scheme name
• Address
• Reference number

Each year your pension provider must issue a statement to each of your employees, detailing information about the current value in their pension and give an indication of how much they can expect to receive when they retire. This is usually based on their expected contribution and salary. To make sure your employees are given the right information in these statements it’s your duty to let your pension provider know about any changes in your employee personal details as soon as possible.

These could include changes to their salaries, contact details or contribution levels.

Your ongoing duties include:

• Making sure that contributions are calculated and deducted correctly and paid to your provider in line with The Pensions Regulator timescales.
• Regularly checking the age and earnings of employees that aren’t currently enrolled to make sure they are enrolled when they become eligible.
• Ensuring that any new employees are assessed and if eligible, enrolled into the scheme. Don’t forget you’ll need to communicate the process to them in writing within 6 weeks of their employment start date.
• You’ll need to manage employee requests to opt in or out of the scheme.
• Let your pension provider know if you’ve agreed with your employee to change their regular contribution percentage. Don’t forget that enrolled jobholders can choose to stop their contributions at any time however it’s up to the employer if they choose to continue to make their contribution on behalf of the jobholder.
• You must also let your pension provider know when employees stop working for you.

You're required to re-enrol employees who aren't in your workplace pension scheme every three years. This is called re-enrolment.

Your first re-enrolment date is three years after your duties start date, although you have the flexibility to choose a date that falls within the three months before and after this date. Whichever date you choose, re-enrolment must be done within this six month window. 

Read more abut this in our What you need to know page.

Each time you go through re-enrolment you'll need to complete a re-declaration of compliance.