Pensions Auto-Enrolment

There are a number of accountants and other companies out there trying to scare people into paying them lots of money to manage their mandatory pensions auto-enrolment obligations.

In fact, for many if not most small businesses it's no big deal and a significant number of them will need to do very little to comply. But if it applies to your business, you must do something so please read this simple Q&A to find out what.

Q: Does it apply to my business?

A: If you operate PAYE, you will have to take action by a certain date specific to your scheme.

Q: What will I have to do?

A: That depends on the number of people you employ, their ages and their salaries. Here are the possible scenarios:

Other than yourself, one or more employees aged between 22 and State Pension Age earning at least 10,000 (833 per month)

You will need to work through the full process and operate a pension scheme for those staff, who are known as 'Eligible Jobholders'.

Eligible jobholders may opt out of the scheme but they cannot do so in advance; so it is quite possible some employers will have to set up a scheme for the sole purpose of it existing in order for staff to opt out of it!

It is illegal to induce or otherwise artificially encourage an employee to opt out.

Other than yourself, one or more employees aged 16 to 21, or over State Pension Age, earning at least 10,000 (833 per month): and/or employees of any age earning 481 to 833 per month

These employees are 'Non-Eligible Jobholders' who have a right to opt in to a pension scheme. If you do not employ any eligible jobholders (first scenario above), you do not have to set up a pension scheme 'just in case' your non-eligible jobholders ask to opt in; but you would have to set one up if any of them does.

You will still have to complete a declaration of compliance.

It is illegal to refuse or otherwise artificially discourage an employee to request to opt in.

Other than yourself, one or more employees of any age earning 481 or less per month

These workers have a right to join a pension scheme if one already exists but you are not obliged to open one for them if there are no other workers in the previous two scenarios.

You will still have to complete a declaration of compliance.

Husband-and-wife, civil partner or unmarried 'household partner' companies

It is likely that any salary will fall into the non-eligible jobholder category described in the second scenario above and you will not have to open a pension scheme.

But you will still have to complete a declaration of compliance.

One-person companies

You are not regarded as being a jobholder regardless of salary and so will not need to open a pension scheme for yourself.

But you will still have to complete a declaration of compliance.


What is 'The Process'?

It's all done online and the start of the process is the same in all cases; but it stops short where there is no obligation to open a pension scheme.

First, you have to provide a point of contact. Then you can start the declaration of compliance, the first part of which is simply administrative data.

Eventually you will get to the part where you have to enter the number of employees falling into the categories in the above scenarios. If there are no eligible jobholders you then skip the bit about the pension scheme itself.

If this is the case, the process takes less than half-an-hour.

What happens if you do have to open a pension scheme is beyond the scope of this advice.


Can we help?

For our existing clients who are not obliged to open a pension scheme, we expect to be able to complete the process on their behalf within the usual level of annual charges.

For existing clients and any new clients who are obliged to open a pension scheme, we will discuss how you want to proceed - there is the option to call in an existing, established pension provider or to manage it directly through the government's scheme ('NEST').

In such cases we will charge at our usual rates according to the time taken. We will not charge any form of premium nor will we profiteer from the fear and uncertainty generated by this new legislation.