Auto-Enrolment


Guide to Auto-enrolment

Our approach to Auto-enrolment advice is based on clearly understanding a company’s financial situation, their administration processes and what they are prepared to put in place for their employees.

The guidance we will give helps them through this process and means we can make sure our solutions are right for each particular company.

Who will Auto-enrolment apply to?

The government has introduced legislation which applies to all employers irrespective of size.

Every employer is required to have a workplace pension scheme in place. You will also have to automatically enrol certain workers into that scheme and make contributions on their behalf.

The date that you will have to comply by is known as your Staging Date and this is based on the number of employees you had at the 1st April 2012

We will help you meet all your Auto-enrolment requirements by the necessary deadlines

Understanding your company

To enable us to advise you appropriately we need to gather certain facts about your company e.g. size, number of employees, affordability and your aims and objectives. We will also ask about your views on staff benefits.

We will then consider the structure of your staff to ensure you are making the correct and most cost-effective method of payment.

Some of the areas we will discuss with you:

  • Is there an existing pension scheme in place?

  • What level of contributions are you prepared to make?

  • What percentage of your payroll is made up of basic salary?

  • Who operates your payroll?

Explaining your requirements

Your requirements can be summarised as follows:

Auto-enrolment of  staff

All eligible jobholders will need to be automatically enrolled in the selected Scheme at the Staging Date. This will be achieved by assessing all staff according to their age and earnings. Jobholders aged from 22 to state pension age and earning more that £10,000 will be categorised as an eligible jobholder.

Jobholders who are under age 22 or over state pension age or earning between £5,824 and £10,000 pa will be categorised as a non-eligible jobholder. They will not be automatically enrolled but will have the opportunity to join and if they choose to join the employer is obliged to contribute.

Any jobholder earning below £5,824 pa will be categorised as an Entitled worker. They will not be automatically enrolled but can choose to join the scheme however the employer is not obliged to contribute.

Communicating with your staff

This is the responsibility of the employer. A letter must be issued to all staff within six weeks of the Staging Date setting out the fact that the employer will be making a contribution to the Scheme and that the employer will also deduct from salary a contribution from the employee.

The employer can choose to send letters that are specific to each category or they can choose to send a generic letter to all staff.

Postponement

The employer can choose to postpone automatic enrolment at the Staging Date for up to three months for some or all of the staff.

You can also elect to postpone new staff members who join the company after the Staging Date and staff members who become eligible for automatic enrolment through age or relevant income. You are required to write to your staff to tell them you are postponing automatic enrolment for them. You will have six weeks from the date postponement starts to write to them.

One of the main reasons you might decide to postpone is if you have temporary or short-term staff who you know will stop working for you within three months. You can also use it to align automatic enrolment with your other business processes. You can, however, choose to postpone automatic enrolment for any other business reason.

The communications mentioned above will make reference to the postponement period you have chosen.

Opting out

Members of staff will be given 30 days to ‘opt-out’ of the Scheme. Details will be included in the letter they receive from the Pension Provider after they have been automatically enrolled. If they opt out within the 30 day period they will receive a refund of any contributions deducted from their wages.

Making contributions

There are two ways of making payments. 

  1. Based on pensionable earnings (usually defined as basic salary)

As long as the basic salary payroll exceeds 85% of the total payroll (including bonus and overtime) the requirement is to make a %age contribution based on basic salary as follows:

                                                                        Employer                               Employee

From Staging Date to April 2018                  1%                                            1%

From April 2018 to April 2019                      2%                                           3%

From April 2019                                              3%                                           5%

If the basic salary payroll is less than 85% of the total payroll (including bonus and overtime) the requirement is to make a %age contribution based on basic salary as follows:

                                                                        Employer                               Employee

From Staging Date to April 2018                  2%                                           1%

From April 2018 to April 201(                       3%                                           3%

From April 2019                                              4%                                           5%

  1. Based on banded earnings

If using this method, the %age contribution is based on total earnings for each employee based on banded earnings (£5,824 to £41,860 for 2014/15) as follows:

                                                                       Employer                               Employee

From Staging Date to April 2018                  1%                                            1%

From April 2018 to April 2019                      2%                                           3%

From April 2019                                              3%                                           5%

The decision as to which method to use will be determined by the structure of your staff and pay. We will assist in making this decision.

Choosing a pension provider

We will research the market for a company which should be used to best meet your requirements for auto-enrolment.

The factors we will take into account when choosing the Provider are:

Contribution levels

The level of contributions you wish to make is important as some Providers operate a minimum average contribution for members which may exclude them from being used.

Your Staging Date

Some Providers require a minimum period of time leading up to your Staging Date to allow them to complete their administration. These times vary from 6 months to 3 months and some have no minimum period requirement at all.

Annual Management Charge

All Providers charge an Annual Management Charge for looking after the Pension Scheme. This charge varies and we would take this into consideration.

Default Investment Fund

It is a requirement for Auto-enrolment Schemes to have a default investment fund which staff are automatically enrolled into. The future value of the employees’ pension will be affected by the choice of fund so it is important to make the correct choice. We will advise on this.

Payroll Frequency

Wages and salaries can be paid weekly, two-weekly, four-weekly and monthly. Not all Providers will accept each of these frequencies.

Communications

When it comes to communicating with your staff some Providers will issue the communication on your behalf, others will provide you with a template for you to use and some give no assistance.

Once we have chosen your Provider we will be able to set out the required process.

What needs to be done and when

The following is an indication of the timing of your requirements and the actions that need to be taken. These are intended only as a guideline as in practice the timings will change.

  • Ideally 3/4 months before your Staging Date we will collect information about your company and obtain payroll data

  • A written report will be prepared by us within two weeks of receiving the information. This will set out costs, recommendations, assessment of your workforce and the actions to be taken.

  • A meeting to present the report should take place at least 2 months before Staging Date. This will be an opportunity to explain the recommendations and agree the basis of the pension scheme

  • We will complete with you the Scheme documentation

  • We will set the scheme up with the chosen Provider

  • The Scheme Provider will send log-in details to allow you to access their system

  • We will conduct staff meetings which should take place within one month of the Staging Date

  • Regulatory communications must be sent from the employer within six weeks of the Staging Date. We will provide the appropriate wording

  • Assessment of workforce will normally be completed by payroll followed by contributions deducted from wages

  • Eligible jobholders will be entered on the Provider template and submitted for auto-enrolment

  • Joining Packs will be sent out by the provider direct to staff members

  • Employer will be advised of any opt-outs and contributions refunded

  • New joiners added and communication issued

  • Declaration of Compliance completed by us and sent to the Pension Regulator within 5 months of staging

Working with your payroll

The interaction between payroll and the scheme provider is an important part of this process.

Fees and charges

When implementing Auto-enrolment there are three main parties that are involved.

  1. Payroll

  2. The Pension Provider

  3. The Financial Adviser

Payroll

 Some payroll providers may charge for providing the assessment of workers service.

The Pension Provider

The charges made are a percentage of the funds invested. This is known as the Annual Management Charge and is made up of the various costs and expenses of running the fund.  In addition, some providers will charge an administration fee.

The Financial Adviser

The amount of fee for advice is agreed in advance. There will be an initial fee for the advice provided and the implementation of any recommendations. There will also be a Servicing Fee for ongoing monitoring, valuations and regular reviews.

The fee can be paid by cheque or BACS.

What happens next?

If you want to proceed further in receiving advice regarding Auto-enrolment it will be necessary to meet to start the process.

We will then prepare our report with recommendations. This report will also outline the fees payable. If you decide to proceed with the recommendations we would then complete the required documentation

We can be contacted at:

Telephone number: 0191 233 6396

Email: admin@bpfc.co.uk

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