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What is Automatic Enrolment?

Workplace Pension Legislation

The new workplace pension legislation requires firms to enrol their workforce into an automatic enrolment pension scheme (known as a ‘qualifying pension scheme’) and make contributions on their behalf.  If you don’t, the Pensions Regulator may impose substantial fines.   Auto-enrolment has proved to be time-consuming and technically complex, particularly around payroll compliance, making it difficult for businesses to comply correctly and on time.   The staging dates for larger companies have already passed, and now it’s the turn of the smaller employers, who actually make up the vast majority of affected businesses.  Staging dates for businesses with less than 30 employees start from June 2015 and run through until May 2017, and then new businesses set up since April 2012 are staging from May 2017 through to February 2018.

 

If you have an existing company pension scheme, such as a Group Personal Pension or a Stakeholder Scheme, it’s highly unlikely that this will be suitable for auto-enrolment, which means you’ll need to either choose a brand new qualifying pension scheme, or contact your existing provider to establish whether this can be adapted to comply with the new legislation.  We can provide advice in this area if you need it.  

Auto-Enrolment Explained

A qualifying pension scheme must be selected well in advance of your auto-enrolment staging date.  Your employees are then assessed into three categories, by age and earnings, to establish who should be automatically enrolled.  The assessments can be made using specialist payroll software or a pension provider’s ‘hub’ or ‘middleware’ product, onto which you load your own payroll data for analysis.  You will have different obligations for each category of employee, but all must be informed of their automatic enrolment options, in writing, at key stages in the process.

On your staging date, your payroll administrator will need to assess the ages and earnings of each member of staff using an auto-enrolment module on their payroll software.  These assessments identify the duty you have for each member of staff.  Your payroll administrator will extract a data file from their software and manually upload this onto your pension provider’s portal.  If you ask a payroll administrator ‘what is automatic enrolment’s trickiest job’, then the data file upload is probably it, because pension providers have a habit of changing their data specifications and the data file can be rejected without warning.     

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