If this user guide already looks too burdensome why not go straight to the next user guide, How Paycircle Ensures Workplace Pension Compliance instead!
- Know your Staging Date
You may know this date already but if you don’t you can use your PAYE reference to check our Staging Date Calculator. If your company PAYE account was set up after April 2012 or if you don’t operate a PAYE scheme, you can read our article about Pension Staging Dates for more information.
- Assess your team
You might want to do an initial assessment of your team to find out who is eligible for automatic enrolment. If you are a business where the only employees are directors, you probably do not have any auto enrolment duties but you do need to tell the Pensions Regulator that you are not an employer. You may also have team members who need to be excluded from assessment, such as people who are under 16 or over retirement age or people who are already members of a compliant company pension.
- Check your team’s details are up-to-date
In order to assess everyone correctly and make sure that any information you send reaches your team members, you might want to check that things like their date of birth, National Insurance number, salary, home address and email address, are all up-to-date.
- Decide the best way to communicate with your team
Setting up and managing a workplace pension involves communicating with your team regarding their status and their options. You also need to keep records of the communications that get sent and received as part of the compliance process. You need to decide on the best method for sending communications and keeping records and which method is most appropriate for your company and your team.
- Check your existing company pension
If you already have a company pension in place, you might want to check whether your existing scheme is compliant for automatic enrolment. The best way to do this is to ask your pension provider. If it is a compliant scheme, you may want to consider using it for everybody – or you can set up an additional scheme with another provider for automatic enrolment.
- Choose a workplace pension provider
If you don’t already have a compliant pension in place you need to decide which pension provider to use and make sure that the pension you choose is compliant for automatic enrolment. If you want to compare pensions, here’s a pension comparison tool you can use, which includes all of the main providers who offer a compliant workplace pension. You may also want to consider whether you apply the standard contribution percentages set by the Government, or set your own contribution percentages – so long as they are not below the ones set by the Government.
- Have a compliant pension in place by your Staging Date
Whether you are using an existing scheme or setting up a new scheme, you need to make sure everything is ready to go by your Staging Date. Even if you postpone your assessment, people can still choose to opt in or join earlier, so you need to have a pension set up just in case.
- Choose whether to stage or postpone assessment
You can postpone the assessment of your team for up to three months from your Staging Date. If you do decide to postpone, you need to send a communication to your team within six weeks of your Staging Date, to let them know that you are postponing and that they can opt in or join earlier if they want to. You will also need to keep records of any communications that you send to your team regarding postponement.
- Choose whether to use other postponement options
There are other situations where you can choose to postpone assessment of individual team members such as, when someone new joins your company or when someone’s enrolment status changes. If you choose to use postponement for an individual, you need to inform them that you are postponing their assessment and keep records of any communications that you send.
- Prepare your team
It’s helpful to let your team know what’s going on. You may decide to send a communication to let them know beforehand which pension provider you have chosen and when they will be assessed for the first time. This can give people the opportunity to do their own research and decide what they want to do in advance. It’s wise to keep records of any communications you send to your team in preparation for auto enrolment.
- Register with The Pensions Regulator
You don’t have to do this straight away but it’s a good idea to register as soon as possible. Registering with the Pensions Regulator let’s them know you are making preparations and will provide them with a contact within your company, for their records. For more information, read our guide to Registering with the Pensions Regulator.
- Don’t do anything that could be regarded as ‘inducement’
It’s very important that you don’t do or say anything which could be seen as inducing your team members to opt out or dissuade them from opting in. This includes your existing team members as well as any new recruits or people you interview for position in your company. The Pensions Regulator takes a very dim view of this and may decide to take action against you.
- Check that your systems are compliant
Whatever systems or methods you are using to set up and manage your workplace pension, you need to make sure that you are able to do everything correctly and on time. You may want to check your systems and processes to make sure that you can monitor eligibility, perform your automatic enrolment duties, manage opt ins and opt outs, calculate the correct contributions through PAYE (with the correct tax treatment) and keep accurate records for the amount of time required under the rules.
The first assessment
- Automatically enrol anyone who is eligible
The first time you assess your team, whether it’s on your Staging Date, the first time you run payroll after your Staging Date or at a later deferred date, you must automatically enrol everyone who meets the criteria.
- Invite others to opt in or join
The first time you assess your team, anyone who is not automatically enrolled needs to be invited to opt in or join the scheme. You need to know who is eligible to opt in and therefore receive employer contributions and who is eligible to join the scheme, whereby compulsory employer contributions do not apply. For more information regarding eligibility, read our article Who is eligible for automatic enrolment?
- Send and keep records of communications to your team
Once you’ve assessed your team and they have either been automatically enrolled or invited to opt in or join the scheme, you need to send everyone a communication to let them know their status and make sure that the communications contain all of the correct information for compliance. You also need to make sure that the communications are delivered, that they are sent within the correct timeframe and that you keep records of all of the communications that get sent.
- Calculate the correct contributions
You need to make sure that contributions are calculated based upon an individual’s pensionable earnings (unless you have chosen otherwise) and at the correct percentage, in line with the Government’s set percentages (again, unless you have chosen otherwise). You also need to make sure that contributions are calculated with the appropriate treatment for tax purposes, in accordance with the scheme you have selected.
- Send information to the pension provider
As well as sending payroll files to HMRC, you also need to send appropriate pension information to your pension provider each pay period. The pension provider will tell you what format to send them the files, or you can enter the details manually each pay period.
- Pay contributions to the pension provider
Once you have processed your pay and pension information and you know what contributions need to be made, it’s your responsibility to pay these contributions on behalf of the company and the employees to the pension company on time.
- Know when the ‘opt out’ period ends
If people who have been automatically enrolled want to opt out of the scheme they have a set period of time to do so. If they opt out within this period their pension contributions are refunded and it’s as though they were never a member of the scheme at all. The opt out period is normally thirty days from the date that an individual gets enrolled. You need to know the opt out date to ensure that anyone who opts out within the set timeframe gets removed from the scheme and has their contributions refunded.
- Manage opt outs, opt ins and joiners
Once initial communications have gone out to all team members, you may receive requests from them to opt in or out of the scheme. It’s the company’s responsibility to make sure that any opt in and opt out notices from employees contain the correct information for compliance, and for opt outs, that they are received within the opt out period. These notices need to be processed and the members added or removed from the scheme as requested. It’s also the company’s responsibility to refund contributions to anyone who opts out during opt out period.
- Keep records of all communications received from employees
It’s important to keep records of all communications that are received during the initial assessment period as they may need to be produced if you are asked to do so by the Pensions Regulator.
- Complete your Declaration of Compliance
Once you have assessed your team and enrolled eligible team members and invited others to opt in or join you need to complete a Declaration of Compliance with the Pensions Regulator. In this declaration, you will need to provide details of the pension scheme as well as details as to who was enrolled, who was excluded and the reason for their exclusion. For more information, see our guide to Completing a Declaration of Compliance.
- Calculate, deduct and pay correct pension contributions every pay period
A company has an ongoing responsibility to calculate and deduct the correct pension contributions for anyone who is enrolled or who has opted in or joined the scheme. It’s important that the contributions are paid to the pension provider on time and that records relating to pension contributions are kept for the correct period, as set by the Pensions Regulator.
- Constantly monitor eligibility for automatic enrolment
A company must track and monitor everyone’s status regarding their eligibility for automatic enrolment on an ongoing basis. When people who have previously not been eligible for automatic enrolment meet the criteria (if they turn 22 or have a pay increase that takes them over the earnings threshold) they must be automatically enrolled and sent a communication to this effect.
- Send communications when anything changes and keep records of communications
Anytime an individual’s status changes with regards to their eligibility the company must send them a communication to this effect. The communications must contain all of the information necessary for compliance purposes and records must be kept of all such communications.
- Manage and process opt in, joiner, opt out and ceasing active membership requests
On an ongoing basis, any notices from individuals to opt in or out of the scheme, must be processed and the members added or removed from the scheme as requested. Once the opt out period has ended, individuals can no longer opt out of the scheme, instead they must Cease Active Membership in accordance with the scheme’s rules. It’s the company’s responsibility to make sure that any opt in and ceasing active membership notices from employees contain the correct information for compliance and that records are kept of all such communications.
- Refund contributions when employees opt during the opt out period
On an ongoing basis, if a newly enrolled individual chooses to opt out during the opt out period, it’s the company’s responsibility to ensure that the opt out notice is processed correctly and that their contributions are refunded.
- Manage new joiners and people leaving your company
When someone new joins the company they must be assessed for automatic enrolment when they join or on their deferral date, if postponement is being used. You must send them the relevant communication within six weeks of their assessment date a keep a record of any communications sent. When someone leaves the company you must inform the pension provider that they are leaving or have left the company so that they can expect to stop receiving contributions for that individual.
- Carry out re-enrolment every three years
It’s a company’s responsibility to manage the process of re-enrolment every three years from the original Staging Date (or first assessment date if postponement was used). This involves re-enrolling anyone who has opted out or ceased active membership since the scheme was put in place. This only applies if the individuals are eligible on the re-enrolment date.
- Complete a Declaration of Compliance every three years
Once a company has been through the process or re-enrolment they must complete a new Declaration of Compliance with the Pensions Regulator. As before, you will need to provide details as to who was re-enrolled and who was excluded and the reason for their exclusion.