- What is Auto Enrolment?
Auto Enrolment is a new legal requirement and all employers are obliged to provide a pension that meets the minimum standards by 2018 (it is phased in for different sizes of employers from 2012). All employees over age 22 and below State Retirement Age, who work or ordinarily work in the UK, must be enrolled into a pension scheme as long as they earn over a certain amount per week or month.
- Why did the government introduce Automatic Enrolment?
The government has stated that it is committed to improving pension saving in the UK to ensure that individuals have the best possible income in retirement from all sources. As you will be aware the recent budget announcement regarding pension funds and the options individuals now have has been unveiled. It is the biggest change to the industry in over 100 years. The Government are committed to ensuring retirees get the best possible outcome for their retirement.
- Can I get help to make sure my employees receive the communication required by the Department for Work and Pensions for auto enrolment?
Yes. We will undertake all of your statutory communication obligations for all workers for whom our selected pension provider is being used (i.e. including entitled workers and non-eligible jobholders who do not join the Plan). This is a requirement of the auto-enrolment regulations and we will assist you in meeting this obligation.
- What happens if my business does not comply with Automatic Enrolment?
Your company will be deemed to be acting unlawfully and there are a number of actions that can be taken, including for more serious prolonged and repeated breaches a fine payable for each day that you are non-compliant. Please refer to “what are the costs”
- As an employer, what’s the benefit of providing a pension scheme for my employees?
Many staff value an employer who helps them in ensuring that they have an income in retirement. While it will not always be the most important determinant, as workers get older and start looking towards retirement it can be a key HR issue. Conversely, now that employers are not able to forcibly retire workers solely on age grounds, you need to ask whether you are happy for your staff to continue working late into their 60s or even into their 70s. Employees are more likely to wish to retire at a point when they can afford it and a good workplace pension can assist in succession planning. Given that compliance with the legislation is required, the more positively you sell the benefits to your employees, the more value they will put on you providing those benefits. If you provide them begrudgingly, you will still have the cost of the providing the benefits. It gives you the employer an opportunity to turn a legal requirement into a benefit by embracing this obligation as soon as possible.
- Can I give my employees cash incentives to not use our pension scheme to reduce my own cost?
No. It is unlawful to either provide incentives to workers to induce them to opt out or to threaten them with any consequences of not opting out. The Pension Regulator will take a serious view on this matter when it comes to light
- What kind of pension schemes are there?
Pension schemes can be set up in a number of different ways and have a range of confusing titles. However, most pensions these days will be some form of defined contribution scheme (the amount that is paid into the pension is known, the value of the fund at retirement is unknown), where a pot of money is accumulated. The recent Budget announcement now means that an employee is no longer obliged to use that fund to buy an annuity in retirement. The options are now far more extensive allowing clients to go into Drawdown or even take the full amount of the pension fund if they so wish, subject to taxation regulation at the time of the fund being taken.
- Can we offer differing contributions and structures for different members?
You can design the plan to meet your business needs, including offering increasing contribution rates over time and/or variable rates where you can offer more if employees pay more. These can also differ for employee groups. The clearer and simpler the structure, the easier it will be to communicate and manage. For example: you may wish to offer enhanced benefits to certain key employees and just the minimum legally required for others.
- Can we postpone individual employees or must they be grouped?
You can only postpone groups and not individual employees. However, you can treat separate groups of employees differently, but you should consider the practical impact on your own processes of doing this. Is it not more productive to do this once and get it right than repeat the process time and again for each group of employees? One time one cost.
- Can we see copies of letters and communications that you will use?
Once your scheme has been accepted, a set of sample communications is available on request. We will arrange a cost efficient provider and there is limited scope for any specific tailoring of the standard communications issued.
- Do I have to provide the same pension scheme and contributions for all my employees?
No. You can provide different schemes and benefit structures to different groups of workers as long as you provide all workers with at least the minimum requirements. See FAQ 8.
- Do we take the pension contribution before or after tax is calculated?
Pension contributions are deducted from an employee’s gross earnings, i.e. before PAYE tax is assessed or deducted. This means that the employee receives the full tax credit (at the highest rate that applies) for any payment made and that the full amount is then credited to the member’s pension pot.
- Does all the money get paid back if members opt-out?
Yes. When members opt-out within the time frame prescribed in the regulations, any money paid to the Trustee account will be returned to the employer. The employer is responsible for re-paying any employee deductions made back to the employee via payroll. This repayment to the employee must be made as soon as possible however repayment from the Trustee account to the employer may take a little longer to arrange.
- Who processes and pays the refunds to the individual and the employer?
Refunds to employees who have opted out within the required timeline should be processed and paid back to the employee via payroll in the next cycle following opt-out confirmation. The Employer must make the refund to the employee irrespective of it receiving back payments made to the scheme.
- When do we pay our contribution towards the pension fund to you?
Statutory rules apply to when contributions deducted need to be paid to the scheme and this is usually on or before the 19th of the month following the month in which deductions were made. We strongly suggest that all contributions are paid to the scheme as quickly as possible after deduction from payroll as this ensures the money is credited to members’ accounts promptly. This saves the need to manage cash flow and reconciliation of multiple payments where required all contributions for a month can be aggregated and remitted at the month end.
- Does the process for auto-enrolment get easier/better after the initial phase?
The initial work at staging is more complex as it involves assessing every worker. After the initial phase including closure of any postponement period the work required is mainly around managing newer employees and those who become ‘eligible’ as they qualify. Key to the overall process is accurate and timely records being provided so continued assessment of employees can be carried out every pay period. Our proposition can help you manage your obligations at the initial stage and on-going. Remember that different systems do run the assessment differently.
- Can I use Ontime if I do not have a suitable payroll system?
Yes. However it will require you to manually work out the requirements for auto-enrolment and then submit the return through the system. This may be challenging and also may mean that you enter incorrect information that may put you inadvertently into a breach position with the regulator. We recommend you update to a suitable provider or ask us to provide one for you.
- Are Ontime Independent financial advisers?
No however our proposition for auto-enrolment is based on a bureau service so although it is not a requirement to be an independent financial adviser we feel this option offers you the best service available. Regulated advice can be given on a bespoke service and can be arranged on a competitive rate if our bureau service is taken up. This is one of the benefits of using Ontime.
- Do Ontime give individual advice to my employees?
No but we can do. Our proposition is purely an Auto Enrolment Solution for you as an employer; this is one of the reasons we are able to keep the cost to you so low. However should an employee require independent financial advice or even legal advice we are able to offer this service as part of our package at competitive rates to the individuals concerned.
- Can my Company claim Corporation tax relief on contributions?
Yes. Auto enrolment contributions from an Employer are an allowable business expense.
- Can my I postpone my Company’s staging date?
No, but you can postpone any or all of your employees auto enrolment by up to 3 months, including new employees joining.