Know your legal obligations on pensions

Automatic enrolment into a workplace pension

All employers must provide workers with a qualifying workplace pension. This is called automatic enrolment.

The largest employers started doing this in October 2012 and small and micro employers should now also be complying. Starting with the largest employers first, since October 2012 employers are required to automatically enrol eligible workers into a qualifying pension scheme, if they are not already in one. Since 1 October 2017, new businesses will no longer be given a date, known as a staging date, when their automatic enrolment duties start. Instead, they will have duties as soon as they employ someone for the first time. Before 1 October 2017, employers were given a staging date, the last of which was reached in February 2018.

When your business must start doing this (called a ‘staging date’) depends on how many people you have on your payroll. Find your automatic enrolment staging date.

If you don’t already offer workers a workplace pension scheme, you must make the necessary arrangements before your business’s staging date. You will receive a letter from the Pensions Regulator 12 months before your staging date, confirming your staging date and outlining the support available to you.

The Pensions Regulator has produced employer guidance on automatic enrolment with helped specifically aimed at small and micro employers. If you already have a workplace pension scheme, check with the Pensions Regulator if you can use it for automatic enrolment.

Who will be automatically enrolled?

You must enrol into the scheme all workers who:

  • are aged between 22 and the State Pension age
  • earn at least £10,000 a year
  • work in the UK

You must make an employer’s contribution to the pension scheme for those workers.

What about workers who don’t have to be automatically enrolled?

Any worker who falls outside the eligible age band – aged 16 to 21, for example, or state pension age to 75 – may opt in to workplace pension saving with a minimum contribution from you.

However, you don’t have to contribute to the pension scheme if the worker earns these amounts or less:

  • £6,032
  • £502
  • £464
  • £116

When workers are enrolled into your pension scheme, you must:

  • pay at least the minimum contributions to the pension scheme on time
  • let workers leave the pension scheme (called ‘opting out’) if they ask - and refund money that they have paid if they opt out within 1 month
  • let workers re-join the scheme at least once a year if they’ve opted out
  • enrol workers back into the scheme once every three years if they’ve opted out and are still eligible for automatic enrolment

You can’t:

  • encourage or force workers to opt out of the scheme
  • unfairly dismiss or discriminate against workers for staying in a workplace pension scheme
  • imply someone’s more likely to get a job if they choose to opt out of the pension scheme
  • close a workplace pension scheme without automatically enrolling all members into another one

What you must tell your workers

When you automatically enrol workers into a workplace pension scheme, you must write to them. In the letter, you must tell them:

  • the date they’ve been added to the pension scheme
  • the type of pension scheme and who runs it
  • how much you will contribute and how much the worker will have to pay in
  • how workers can leave the scheme if they want to

How much will you have to contribute?

The level of pension contributions will be phased in over time to help employers and individuals adjust. Where a worker is automatically enrolled in a defined contribution (DC) scheme or NEST (the National Employment Savings Trust), there will be a minimum contribution of 8 per cent of qualifying earnings, of which the employer must pay a minimum of 3 per cent. If the employer chooses to pay the minimum 3 per cent, the worker will pay 4 per cent, with a further 1 per cent paid as tax relief by the government. Qualifying earnings are earnings between £6,032 and £46,350.

The original plan was to phase in these minimum contribution levels between October 2012 and October 2017. However from 6 April 2018 the minimum rate of employer pension contributions increases from 1 per cent to 2 per cent of banded earnings. Contributions will increase to 3 per cent from 6 April 2019.