Automatic enrolment; helping your UK business comply

If you are an international business thinking of setting up a subsidiary limited company in the UK as part of your strategic plan for 2022, one of the company obligations you need to be aware of are Workplace Pension Scheme, also known as ‘automatic enrolment’. When hiring staff, these obligations become effective immediately, so it is best to be pro-active to ensure compliance and avoid fines.

What is the automatic enrolment pension scheme?

Since 2012, employers are required by law to have a qualifying pension scheme. As a result, many UK employers have been affected and there has been a significant increase in fines from the The Pension’s Regulator.

Due to the Pensions Act 2008, every employer in the UK must provide a workplace pension scheme for eligible staff and contribute towards it as part of their auto enrolment responsibilities.

How is the automatic enrolment pension calculated?

Automatic enrolment applies for any employer with at least one employee who meets the following conditions:

  • They are aged between 22 and state pension age
  • And earns over £10,000 per year (or £833 per month / £192 per week)
  • And they work or ordinarily work in the UK.

Currently the amount that will need to be paid into a workplace pension is an overall minimum of 8%, with employers contributing at least 3% of this total amount. The qualifying earnings are currently those between £6,240 and £50,270 per annum.

What are the employer’s duties for automatic enrolment pensions?

  1. Monitoring employees’ ages and earnings, (including new starters) to check eligibility for pension schemes. You must put them into a scheme and write to them within six weeks of meeting the age and earnings criteria, unless using prior communicated postponement for 3 months.
  2. Managing requests to join or leave your scheme.
  3. Keeping records of how you’ve met your legal duties.
  4. Maintaining contributions into workplace pension schemes every time you run payroll.
  5. Re-enrolling staff back into your pension scheme if they have previously left it and they continue to meet the criteria to be put back into it. This needs to be done every three years and is called ‘re-enrolment’.

What are the ongoing duties for employers?

As an employer, compliance with the rules is your responsibility. Many employers underestimate the time involved with the implementation of a qualifying pension scheme and the ongoing administration requirements the legislation requires. Some ongoing duties include:

  • Ensuring your pension scheme continues to meet the rules and that the chosen default investment fund is still fit for purpose.
  • There are three acceptable definitions of ‘Qualifying Earnings’ on which you might base contributions, so you need to choose the one that makes the most sense for your business.
  • Assessing and modifying your contributions for every pay period. Auto enrolment doesn’t finish once you’ve set up a qualifying scheme and performed the initial enrolment.
  • Auto re-enrolment will occur every three years. This means that you must re-enrol eligible staff into an auto enrolment pension scheme, if they’re not already active members of one, every three years after your staging date.

How can we help?

Carpenter Box Financial Advisers have built up significant experience dealing with a wide variety of employers who needed assistance in meeting their legal requirements. Our team can provide a complete service which will help ensure your UK company is compliant on an ongoing basis by:

  • Providing an initial evaluation of your workforce that identifies eligible employees.
  • Designing a suitable pension solution that meets legislative requirements.
  • Communicating any changes with your staff.
  • Implementing changes.
  • Ongoing monitoring of the scheme to ensure compliance is maintained.

For information or advice, please get in touch with a member of our independent financial advisers on 01903 534587.