“Automatic Enrolment” is the process by which employers must make arrangements for their workers to become members of a workplace pension scheme.
Unlike the previous stakeholder regime there are compulsory minimum employer and employee contributions payable.
How can Vialex help?
Together with our colleagues at Navigator Employment Law, Vialex can:
- Advise you on your duties as an employer and assist you in relation to assessing your workforce and on matters such as contractual enrolment and postponement.
- Review your proposed pension arrangements and confirm whether these meet the criteria for a “qualifying workplace pension scheme” or advise you if any amendments are required.
- Review any employment contracts and staff handbooks to ensure that these reflect your pension obligations and ensure that these are updated if required.
- Advise you on your communications with your workers, and with your record-keeping duties.
Assessing your workforce
Employers must assess their workforce and determine whether their staff are “workers” for the purposes of the legislation.
Please note that an individual whom HM Revenue and Customs class as being self-employed may still be a “worker” for the purposes of automatic enrolment in certain situations.
Thereafter employers must identify which of the three categories their workers fall into based on their age and their earnings: eligible jobholders, non-eligible jobholders, non-entitled workers.
- Eligible jobholders must be automatically enrolled into a workplace pension scheme, but may choose to opt out of it if they wish.
- Non-eligible jobholders may opt to join their employer’s scheme, and if they do, they are entitled to have employer contributions paid on their behalf.
- Non-entitled workers may also opt to join their employer’s scheme, but have no right to any employer contributions if they do.
Selecting a pension scheme
Employers must also decide which scheme or schemes they wish to use for automatic enrolment.
This may be an existing scheme or a scheme established for this purpose, provided that they meet the criteria for a “qualifying workplace pension scheme”.
There are different sets of requirements for defined benefit and defined contributions schemes and employers may need to amend their scheme rules to ensure it complies with these.
Alternatively, employers may opt to automatically enrol workers into the National EmploymentSavings Trust or NEST. This is a centralised scheme administered by a non-departmental public body known as NEST Corporation, and is open to all employers and the self-employed.
Employers need not use the same pension scheme for all of their workers and may use a combination of alternative schemes and/or NEST provided that the classes of workers eligible for each are clearly identifiable and there are no potential discrimination issues arising from this.
As an alternative to automatic enrolment employers may choose to use contractual enrolment instead. Under this approach an employer would immediately enrol all of its workers into a workplace pension scheme, though they would have the right to cease scheme membership if they wish.
Although this avoids the need for an employer to assess whether its workers are eligible jobholders, non-eligible jobholders or entitled workers there are still a number of duties the employer must comply with.
There may also be problems in respect of members with benefits at or above the standard lifetime allowance and who have fixed or enhanced protection.
Employers may also decide to postpone automatic enrolment for a period of up to three months and may do so in respect of a particular worker or group of workers. At the end of the postponement period they would then automatically enrol those workers concerned who are eligible jobholders.
There are communication requirements employers must comply with if they exercise postponement, or their workers opt-out or otherwise leave the pension scheme, to ensure their workers are aware of what is happening and their rights, and it is important that these are met.
For further information please contact Steven Dunn or Scott Moncur (details below).