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Automatic enrolment - common questions and the answers

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We’ve compiled a list of questions that we’re commonly asked by our clients about automatic enrolment, and answered them on the following slides.

From 'What is automatic enrolment, and does it apply to me?' to 'How do I choose the right pension supplier?' you'll find the most frequently asked questions - and the answers you need.

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Automatic enrolment - common questions and the answers

  1. 1. Automatic enrolment Common questions and key considerations
  2. 2. We’ve compiled a list of questions that we’re commonly asked by our clients about automatic enrolment, and answered them on the following slides. www.easyasae.co.uk
  3. 3. What is automatic enrolment, and does it apply to me? If your organisation employs one or more people in the UK, then automatic enrolment will apply to you. Every employer is required by law to enrol certain workers (typically employees between age 22 and state pension age, who earn over £10,000 p.a.) into a suitable workplace pension scheme and contribute towards it. This is called ‘automatic enrolment’.
  4. 4. When do we need to be ready? Organisations with 30 employees or fewer should be getting ready now, as automatic enrolment can be complex and time-consuming. Every organisation has been given a ‘staging date’ and you must have your pension scheme in place by this date. You can check your staging date here. Employers who don’t comply could face a range of fines, starting with a fixed penalty of £400, escalating to fines of at least £50 per day for non- compliance. Even if you already operate a pension scheme, you need to ensure it meets the qualifying criteria.
  5. 5. When should I start planning? We recommend you start six months ahead of your staging date to give yourself sufficient time to plan and make the necessary decisions, and implement your agreed method of compliance.
  6. 6. What do we need to do? By your staging date you need to: •decide what contributions rates you will use and whether these will be the same for all workers •review any existing workplace pension arrangements you have •establish a workplace pension scheme that meets the automatic enrolment requirements •decide what, if any, postponement rules you will apply •ensure you have processes in place to deal with both your initial and ongoing employer duties.
  7. 7. How much do I have to contribute? There are 2 important decisions you need to make before your staging date: 1.what will be my chosen definition of pensionable salary? 2.what contribution rates will apply and will it be the same for all workers? The most widely used contribution model is based on qualifying earnings. Generally, total contributions for eligible jobholders must meet a minimum of 8% of qualifying earnings (also known as the relevant quality requirements or RQR) by 6April 2019.
  8. 8. How much do I have to contribute? Qualifying earnings include salary, wages, commission, bonuses, overtime, statutory sick pay and statutory maternity, paternity and adoption pay, that fall into a band of earnings between £5,824 and £42,385 per year. Employers must eventually pay a minimum of 3% of qualifying earnings into a suitable workplace pension scheme. For example: An employer would be required to pay £10.44 per month (£125.28 per annum) for an eligible jobholder with total annual earnings of £10,000: £10,000 - £5,824 = £4,176 £4,176 x 3% = £125.28 employer pension contribution
  9. 9. How do I choose the right pension supplier? On the Information for Employers section of their website, The Pensions Regulator states that: “You must select a pension scheme which meets certain legal requirements. These include, for example, that the scheme does not require the worker’s consent to join, it allows workers to join from their first day of employment, it is tax registered in the UK and it allows for the minimum legal contributions from employers and workers.”
  10. 10. How do I choose the right pension supplier? “You should also choose a good quality pension scheme that is well run, offers value for money and protects your workers’ retirement savings. Selecting a good quality pension scheme is not a difficult process and, from your perspective, it doesn’t have to cost more than a scheme which is of a lesser quality.” Through our Easy As AE website we offer 2 options, both providing access to a good quality pension schemes. Visit the Easy as AE website to find out more.
  11. 11. What are the requirements in terms of communicating with staff? There are certain statutory communications you need to issue to workers from your staging date. These should be managed as part of your ongoing compliance process. Every different worker type will need to be issued with a communication following their first assessment. If after the first assessment (i.e. in the pay period) there have been no changes to the worker profile and type on your payroll, there may be no new actions required. However, when you take on new workers you’ll need to assess them the first time they appear on your payroll. You also need to monitor workers on an ongoing basis as either of the following may trigger a change in worker category: • A worker’s earnings increase and their worker category changes • A worker turns 22
  12. 12. What are the requirements in terms of communicating with staff? Also, every three years (from your staging date), you’ll need to re-enrol any workers who meet the eligible jobholder worker type – these workers may have opted out or ceased active membership of the scheme. You may wish to tell staff about automatic enrolment and the decisions you’ve made ahead of your staging date. This will give workers the opportunity to understand what automatic enrolment means and how it may affect them.
  13. 13. Where can I go for help? There is lots of useful information about automatic enrolment on our Easy as AE website – click here to visit the site. Easy as AE is a cost-effective online solution, from just £999 + VAT (or £899 + VAT for existing Lucas Fettes & Partners clients or NCVO members). Call 0845 357 8910 Email easyasae@lucasfettes.co.uk

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