1) If a worker is eligible you must enrol them (even if they protest)
There are some limited exceptions to this but generally the law requires you to work out which staff to enrol and then do it, even if they don’t want a pension. They can then opt out after you’ve enrolled them.
2) You don’t have to choose NEST
It is easy to think that because the government set up NEST for auto enrolment, it is the only option. In fact, there are lots of pensions to choose from, some of which may be better for your staff. If you’re not paying for professional advice, a good starting point is the list of pension schemes on the website of The Pensions Regulator.
3) You must decide on the pension contributions
You must decide how much money your eligible staff will pay towards their pensions and how much you will top it up. There is a minimum amount required by law and your pension company may also restrict the available options.
The employer’s contribution must be at least 1% of qualifying earnings. When you add that together with the employee’s contribution and any tax relief, it must come to at least 2%. These figures are due to increase in April 2018 and are based on qualifying earnings (see below).
4) Qualifying earnings are a band of earnings
If you want to set pension contributions to be a percentage of gross pay you can, but the smallest legal contributions are based on a band of earnings called qualifying earnings.
- The band starts at £486/m (or £112/wk) so earnings below this aren’t counted.
- A pound above the threshold counts as a pound of qualifying earnings.
- The band ends at £3,583/m (or £827/wk).
These figures are expected to increase in April so the band runs from £490 to £3,750 per month (£113 to £866 per week).
5) You need to file a declaration of compliance
On the date your main auto enrolment duties start (which for existing employers is called the staging date) you must work out which staff to put in a pension. Within 5 months of this date you must go online and fill in a declaration of compliance, otherwise you can expect a compliance notice from The Pensions Regulator.
This list only covers a few, key points. You can find out more on the website of The Pensions Regulator or in our Automatic Enrolment Guide.