What are workplace pensions?

What is the Auto-enrolment scheme? The Auto enrolment scheme is a workplace pension scheme that was introduced by the UK government that essentially helps employees save their money in order to obtain financial retirement benefits in the future. As per this scheme, it is mandatory for both the employer and employees to contribute and is…

Ash Hall
Head of Product

Sep 16, 2020
4 minutes read

What is the Auto-enrolment scheme?

The Auto enrolment scheme is a workplace pension scheme that was introduced by the UK government that essentially helps employees save their money in order to obtain financial retirement benefits in the future. As per this scheme, it is mandatory for both the employer and employees to contribute and is the responsibility of the employer to enrol all eligible employees of their workplace automatically, unless they want to opt out. You can also motivate your staff to remain within the scheme, but they can leave the scheme whenever they want to.This scheme could be very beneficial for employees as it increases their financial security and creates a sense of stronger independence as they approach retirement.

Who can enrol for workplace pension?

There is an eligibility criterion that employees should meet in order to enrol on the scheme:

1. This scheme is generally for people working in the UK but does also includes people who are based in the UK but travel abroad for work.
2. People aged between 22 and the state pension age are eligible for this scheme.
3. Anyone with an income of £10,000 and over / year are eligible

There is a state pension calculator available to use if unsure of the state pension age.

How much do you have to contribute?

The total contribution of 8% to auto enrolment schemes includes –

1. 3% Employer’s contribution
2. 1% Government tax relief
3. 4% Employee’s contribution

When you contribute towards an employee pension, it decreases your national insurance bill. Changes happen in contribution rates from time to time. Therefore, it is important to follow government guidelines in order to stay updated.

Paying contributions

It is the responsibility of the employer to deduct the contributions from the salary of their employees each month. The contributions made must reach the staff pension scheme on the22nd day of the following month (19thif paying by cheque). Employers must pay their contributions for each of their employee by a date that is mutually agreed on with your pension provider whenever the payroll is run. In the case of missing a payment, you can actually back date payments too. You could be fined for non-payments or late payments of the minimum contribution for each staff member.

Requests for joining or leaving your pension scheme

Any member of staff can put a request in to join the pension scheme. You just need to check their eligibility and can enrol that person onto the scheme within 1 month of receiving their request.

Staff can opt out of the pension scheme at any time. It’s your responsibility to make them opt out of the scheme within a month of receiving their request. If staff leave the pension scheme within one month, you must refund their contribution within a month’s time period. In case your staff leave the scheme after the “opt out window” has passed, the contributions made by them will be kept in their pension account until the time of retirement.

Managing your workplace pension scheme

Here are some important tips that you can easily manage your workplace pension scheme –

1. Identify staff eligibility criteria every time they are paid
2. Set up & register the auto-enrolment workplace pension scheme introduced by the UK government
3. Make contributions and enrol eligible employees automatically to the workplace pension scheme and motivate staff to remain on the scheme (If possible)
4. Enrol employees who are unable to meet the eligibility criteria but want to join this pension scheme
5. In case staff members become eligible for the pension scheme due to a change in their age or earnings: write to them within 6 months of the date they are eligible for the scheme.
6. Manage the whole process of automatic enrolment and solve the queries of your staff in relation to auto enrolment.

Records

1. Names& addresses of enrolled staff
2. Requests related to joining or leaving of pension scheme
3. Your pension scheme reference or registry number
4. When the payment of contribution is done

Any good payroll software provider, such as Nomi will be able to help you maintain your statutory records.

What about NEST?

If you have a limited number of employees, it is suggested that you apply for Government’s NEST (National Employment savings trust) scheme. There are many advantages of this pension scheme:

1. Easy to set up & use
2. No charge for the employer
3. Friendly in nature (Support different languages)
4. Government backing
5. Good customer support

How Nomi helps in paying contributions into the auto enrolment scheme?

1. Easy integration to Government’s NEST pension scheme, as well as SMART, Aviva, Legal & General and Now.
2. Automatically calculate pension contributions for each member of staff depending on the specified eligibility criteria.
3. Easy addition or removal of staff members joining or leaving the scheme and automatically calculates both the employee and employer contributions.