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EXECUTIVE REPORT


Auto-enrolment update


Employers of any size should recognise that pension auto-enrolment is an on-going exercise and requires compliance with any rule changes, says Adam Bernstein.


The automatic joining of workers to a company pension scheme, known as auto-enrolment, celebrated its fifth birthday last October 2017. The process was finally completed on 1 February 2018. However, there are on-going responsibilities to be aware of.


Nathan Long, a senior pension analyst at Hargreaves Lansdown, says auto-enrolment tackles the huge, impending social problem of people not having sufficient monies to support themselves in retirement. “It is so important that the sniffer dogs at the Pension Regulator have been unleashed to track down the employers that are not complying with these new rules. In fact the Pension Regulator has issued fines to employers on more than 20,000 occasions.” These can run up to £10,000 per day for the largest firms, but even the smallest businesses can see fines of £50 or £400 per day.


Employers of all shapes and sizes are now tasked with ensuring eligible staff are saving for retirement. This includes those aged between 22 and State Pension Age and who earn over £10,000 per year. Their pension contributions currently need to be at least 2% of ‘qualifying earnings’ with at least 1% coming from the employer. These are effectively all earnings between £5,876 and £45,000, meaning there is no need to pay pension contributions on the first £5,876 an employee earns.


Rise in minimum contributions


The problem for employers, as Nathan Long sees it, is that these minimum contributions are due to rise to 5% in April 2018 (with at least 2% coming from the employer) and 8% in April 2019 (with at least 3% coming from the employer). “It may be job done for the government, but it’s one that is never truly complete for employers due to their on-going responsibilities as part of the rules.”


These responsibilities can be broken into five steps:


1. Join staff to the company pension when they become eligible. Keep an eye out for newly eligible staff. The obvious group are your new employees. Nathan Long says that, providing they (presently) earn over £833 per month or £192 per week and are between 22 and State Pension Age they will need to be enrolled. “Be careful with those people who weren’t enrolled first


time round as they didn’t earn enough or were too young, because when their circumstances change you’ll need to put them in, too.”


You may employ staff who receive a seasonal spike in earnings - perhaps a Christmas bonus or extra hours. As eligibility is measured by pay period, even a short spike could mean you have to enrol some people, so remain vigilant. It is possible to offset this disruption by deferring entry to the pension by up to three months. “Don’t ignore those who are not enrolled. If they ask to join you’ll have to enable this and pay contributions if they earn over £490 per month (£113 per week).”


2. Deduct the correct level of contribution from an employee’s pay and pay this and the required amount from the company to the pension provider. Nathan Long says this should be a matter of course for most employers, particularly if they outsource their payroll or use a provider’s software. He advises firms to “be extra vigilant, though, when pay changes or bonuses are paid as these events could lead to change in the amount that needs to be deducted.” Employers also need to comply with the increased contributions from April 2018 and April 2019.


3. Certify your scheme meets the requirements at least every 18 months. Certification is simply an audit of your pension scheme to make sure you have paid the right amount, for the right people. There is no need to submit anything, but your house must be in order should the Regulator come calling.


4. Re-enrol any staff that are not in the scheme every three years. Re-enrolment of those who have opted out or left the scheme previously must occur every three years, around the anniversary of an employer’s staging date (start date for auto-enrolment). This ensures they are continually given the opportunity. Once complete, the results must be passed on to the Regulator.


5. Make sure you don’t fall foul of any changes to the rules. Nathan Long notes that “there is a ruthless determination to ensure auto-enrolment remains successful and, with the government currently consulting on any necessary amendments, the rules are almost certain to be tweaked.”


• Employers are responsible for providing a workplace pension. 26 www.thepensionsregulator.gov.uk


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