Workplace pension rules (AKA company pension rules)
By February 2018, all employers, whether a company or a small business, must offer a workplace pension (AKA company pension) scheme by law. If you haven’t already got your scheme in place, now is the time to start preparing.
There are many rules about what a company must and must not do. Here, we look at these in simple terms, to help you better understand what is required.
Workplace pension rules mean that an employer must automatically enrol members of staff into the company pension who:
- Are aged between 22 and state pension age
- Earn £10,000 a year or more*
- Work in the UK
These categories of worker are known as eligible jobholders.
* For the 2016-2017 tax year
Auto enrolment can be delayed for the first three months of employment, if the employer feels this is appropriate (to allow new staff to complete a probationary period, for example).
Anyone aged between 16-74, ordinarily working in the UK and have Qualifying Earnings in excess of the lower threshold but less than the Earnings Trigger; or between 16-21 and SPA and 74, ordinarily working in the UK and have Qualifying Earnings in excess of the Earnings Trigger are classed as non-eligible jobholders and are able to opt in to the Automatic Enrolment Scheme.
Anyone aged 16-74 who ordinarily works in the UK and who has earnings below the lower threshold for Qualifying Earnings is an entitled worker and can still be enrolled if they request it (their employer cannot refuse). This equates to £486 per month in the current tax year.
Likewise, employees have the chance to opt-out if they wish (they can enrol back in once every year if still eligible).
Company pension contributions
The employer must deduct staff’s contributions from their pay and pay this into the scheme by the 22nd of the month following the month in which the contribution is deducted from the member’s salary (if paid electronically) or by the 19th of the month in any other case.
Where the worker is an eligible jobholder or non-eligible jobholder, the employer is also expected to contribute at least 1% of the workers’s qualifying earnings before tax into the pension scheme on time. This rises to a minimum employer contribution of 3% in 2019.
What an employer must not do
Remember, employers must allow their staff to make decisions about their pension without force. They should not:
- Discourage or ban anyone from the scheme
- Dismiss or discriminate against those who are in the scheme
- Imply that someone is more likely to get a job if they opt-out
- Close a workplace pension without automatically enrolling all members into another one
There are also rules around how employers provide information on the company pension. The following information should be provided in writing:
- The date the employee has been or will be added to the scheme
- How much each party will be contributing
- How to opt out, should the employee wish to
Once everything is set up, there will of course be the need to manage records, ensure that new staff are enrolled properly, and regularly review that the process is working and sticking to the rules.
If you have questions or are worried about adhering to the rules, get in touch and we can advise you further.