As an employer, there are a few key things you must do to make sure that your workplace pension scheme is compliant with auto enrolment legislation. If your scheme isn't compliant you could end up with some hefty fines from The Pensions Regulator, so it’s important to make sure that you stay on track.

Not sure where to start? Take a look at the guide below to get all the information you need.

What you need to do

Step one

Set up a workplace pension

You must have a workplace pension scheme in place by your duties start date which meets the auto enrolment criteria. (Your duties start date is the day your first member of staff joined the company – you can't change this date). You must auto-enrol any of your employees you decide are eligible, unless they are already members of a suitable scheme.

Eligible employees are those who are at least 22 years old, but under State Pension age, earn more than £10,000 a year and work in the UK.

If you already have a pension scheme in place, it might be suitable for auto enrolment. Just make sure it meets the following conditions:

  • It has a suitable default investment fund that all employees’ pension contributions will be invested in, unless they decide that they want to choose their own investment options
  • The pension provider/trustees agree that the existing pension scheme can be used for auto enrolment
  • The level of pension contributions that you and your employees contribute to the pension scheme meet the minimum levels for auto enrolment
  • All employees who meet the auto enrolment criteria are enrolled onto the pension scheme

Step two

Send regulatory communications to your workforce

There are certain regulatory communications that you need to send to your employees to make sure they know all about auto enrolment. You can send them via letter or email – just make sure that you send it within 6 weeks of your duties start date and include these details:

  • When they can join the workplace pension scheme
  • The scheme's key features of your chosen workplace pension scheme
  • Who will be auto-enrolled, and who can choose to join the pension scheme
  • How they can opt out if they choose to leave the pension scheme

The compliance software you use may be able to help you with this.

Step three

Declare your compliance

You’ll need to let The Pensions Regulator know that you have a compliant workplace pension scheme in place. To do this, you'll have to complete a declaration of compliance on The Pensions Regulator site within five months of your duties start date. You or someone acting on your behalf, like a financial adviser, can complete this.

Your auto enrolment duties won't be fulfilled until you've completed a declaration of compliance - The Pensions Regulator could fine you.

Step four

Perform your auto enrolment duties

Once your workplace pension scheme is up and running, you'll have regular auto enrolment duties. To stay compliant, you’ll need to:

  • Assess your staff each time they're paid to see if there are other employees who can now be auto enrolled.  An employee's earnings may have increased, for instance, or they've had their 22nd birthday since they were last paid meaning they're now eligible to be auto enrolled.
  • Add new members to the scheme.
  • Deal with employees who want to opt in or out of your scheme, or stop active membership.
  • Pay the contributions generated by paying your staff.
  • Perform re-enrolment duties once every three years so that eligible jobholders who have left your pension scheme or stopped paying pension contributions can be put back onto the scheme.
  • Keep records of what you have done, including all the arrangements you have made and contributions you have paid, for six years.  Records of opt-outs must be kept for four years.

Top three tips for employers

Don’t miss the start of your AE duties

If you’re not ready for the start of your auto enrolment duties, you could be fined or prosecuted by The Pensions Regulator. You might also need to pay back your employer any contributions you missed, as well as contributions from your employees. If you think you might miss your duties start date, contact The Pensions Regulator to let them know, and discuss your plans for getting back on track.

Choose the right pension provider

Before you choose your pension provider, it’s worth considering how much time you’ll have to spend on your auto enrolment duties, and the level of service and support you’ll need. Different pension providers offer different tools and support, so it pays to choose carefully.

Use postponement if you need to

If you have a valid business reason, you can postpone assessing your staff by up to three months. This can allow you to adjust the timing of the assessment to work better for your business.

What you can’t do

Encourage employees to leave your pension scheme

You must not in any way encourage employees to leave your pension scheme. This is known as inducement. Employees have the right to tell The Pensions Regulator if they feel they’re being forced to leave a workplace pension scheme.

Close your workplace pension scheme

You can’t close your workplace pension scheme without having another workplace pension scheme in place – and the new scheme must be suitable for auto enrolment.

Fines and penalties

How to avoid fines and penalties

To avoid penalties or fines, you need to fulfil these auto enrolment duties:

  • Set up a workplace pension scheme with a default investment option by your duties start date
  • Assess your employees to see who’s eligible to be auto-enrolled
  • Send out regulatory communications to tell your employees about your auto enrolment duties
  • Auto-enrol all employees who earn more than £10,000 a year, work in the UK and are aged between 22 and their State Pension age
  • Opt out any employees who have chosen not to be part of the pension scheme, and refund any pension contributions that they've already made. If you choose Aviva as your provider, we’ll accept and process opt-outs for you, passing back any contributions you need to refund
  • Make pension contributions for all employees who are members of your workplace pension scheme. This means all employees who have been auto-enrolled, and any additional non-eligible jobholders who’ve opted in
  • Ensure that the pension contributions you’re making for your employees meet the required minimum contributions levels, and pay these directly into the workplace pension scheme alongside all employee pension contributions
  • Submit a declaration of compliance to The Pensions Regulator
  • Keep the scheme open, keep paying contributions and make sure none of your actions lead directly to your employees opting out or stopping their contributions

Fines and penalties you could face

If you’re struggling to put a compliant workplace pension scheme in place, contact The Pensions Regulator as soon as possible to tell them.

If you keep failing to meet your auto enrolment duties, you’ll have to pay escalating fines. If you still fail to comply after receiving multiple fines, you could face legal action and eventually a prison sentence of up to two years.

The Pensions Regulator is committed to working with employers who communicate and cooperate with them. You can avoid any legal action by making sure you always fulfil your auto enrolment duties, keeping The Pensions Regulator informed of all changes.

Types of notice

If you’re breaching, or in danger of breaching your auto enrolment duties, The Pensions Regulator will contact you to ensure that you’re taking steps towards complying. If you fail give them the information they've asked for, they may send a formal request for information. If they review this information and find that you've breached your auto enrolment duties, they'll give you a statutory notice in relation to that breach. If you don't give The Pension Regulator the information they ask for, or don't comply with a statutory notice, you could be issued with a fixed penalty notice or escalating penalty notice. A persistent non-compliance could mean you are prosecuted. Find out more about each of these notices below - the statutory notices are marked with an asterisk*.

A formal request for information

A compliance notice*

A third party compliance notice*

An improvement notice*

An unpaid contributions notice*

Prohibited recruitment practise notice*

Fixed Penalty Notices

Escalating Penalty Notice