“Auto enrolment rules mean that you’ll need to think about providing a workplace pension scheme as soon as you set up your business. But it’s not just on day one that you’ll need to think about your pension scheme – just as you’d expect your company to evolve and grow, your pension scheme and your responsibilities will change over time.
We take you through what you’ll do on day one, from month to month and in the future to stay on top of your duties.”
Malcolm Goodwin, Head of Workplace Savings and Retirement, Aviva
Do your research
It always pays to do your homework first. Find out more about auto enrolment and what running a pension scheme will involve.
Get set up
You’ve started your company and you need to hire employees. You need to have a workplace pension scheme set up as soon as your PAYE duties start, so you can immediately provide eligible employees with a pension scheme. The first thing you’ll need to do is…
Choose a workplace pension provider
You’ll need to choose a provider. There’s lots of choice of pension providers in the market. Some things you might want to consider will be:
How easy will the pension scheme be to run?
Check how much admin and time will be involved in running the scheme each month.
Do you use payroll software and if so is it compatible with your pension scheme?
A pension scheme that you can integrate with your payroll software will make running your scheme far easier.
Is the pension scheme easy for your employees to manage?
You might want to look for a workplace pension provider that offers a platform where employees can manage their pension scheme online. Employees will then be able to quickly monitor performance, switch funds or get a valuation – so they can really take control of their pension.
Is the pricing structure right for your business?
Different pension providers can have different pricing structures. They can range from having one-off set up costs to having multiple employee charges. It’s a good idea to check whether the pricing structure is suitable for you and your employees.
Set up your pension scheme
Different providers will have different ways for you to set up with your pension scheme. With some providers, such as Aviva, you’ll be able to apply online.
Enrol your employees
Once you’ve set up your pension scheme, you’ll need to enrol any eligible employees and start making pension contributions. Employees who need to be auto enrolled will meet the following criteria:
- Be aged between 22 and state pension age
- Earn more than £10,000 a year
Although you need to do this on day one, enrolling employees will also be an on-going duty. Your employees may start to earn above the minimum amount that makes them eligible for auto enrolment. You may also hire new employees. When this happens, you’ll need to auto enrol them.
Your employees don’t need to stay in your pension scheme. If they decide they no longer wish to be a scheme member, they can opt-out. They have a month to do this from when their pension scheme membership begins. Some providers (such as Aviva) will have an online opt-out process. Other providers will have a manual opt-out system and will require a paper form with a unique code for each employee who chooses to opt out.
Complete your monthly payroll
Each month, when you run your payroll, you’ll need to calculate your pension contributions.
Currently, you’ll need to contribute a minimum of 2% of your employees’ earnings to their pension pot and there needs to be a total minimum contribution of at least 5% of employees’ earnings being paid in this tax year.
On 6 April 2019, they’ll increase again to a minimum contribution rate of 8%, with a minimum employer contribution of 3%. You’ll need to issue communications to your employees telling them about what is happening.
Depending on your pension provider and the type of payroll software you use, these contributions may be taken automatically. If they’re not taken automatically, you’ll need to manually upload a data file of your contributions.
There may be further increases in future – keep an eye on The Pensions Regulators website to keep up to date with any changes.
Every three years
Every three years you’ll need to re-enrol any eligible employees who have either opted out of the pension scheme, been paying less than the minimum auto enrolment contribution rates or stopped paying pension contributions completely. You’ll need to write to any employees who are re-enrolled, to let them know they have re-joined the pension scheme.
If your employees still don’t want to be a member of your pension scheme, they are free to opt-out or pay less than the minimum pension contributions again.
In the future
Your business can change a lot over time. Re-enrolment is a good check point to see whether you’re happy with your workplace pension scheme provider, but depending on the speed at which your business changes or expands, it may be worth reviewing sooner. Switching provider could save you time and money and the switch may be easier than you think. So, what do you need to consider when thinking about making a change?
Have your business’s technological capabilities changed?
If you’ve changed the way your payroll works or are completing more of your admin online than you were when you first set up your business, it could affect which pension provider is the best for you.
Do you need more support?
How easy or difficult have you found running your pension scheme? If you feel you need more support, you could consider switching to a provider with a better level of customer service.
What are the levels of opt-outs like?
If lots of your employees are deciding to opt-out of their pension scheme, it may be worth discussing with your employees why this is. It could be because of factors outside of your provider’s control, but if there are elements such as poor employee communications or the pension scheme being difficult for your employees to manage, it may be worth considering an alternate provider.