Auto enrolment: am I legally compliant?

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. Failure to comply can result in some hefty fines from The Pensions Regulator, so it’s important to make sure that you stay on track.

Not sure where to start? We’ve put together this straightforward guide to give you all the information you need to know.

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 that meets the auto enrolment criteria. (Your duties start date is the day your first member of staff joined the company – you cannot change this date.) You must auto-enrol any of your employees you assess as 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, this might be suitable for auto enrolment. Just make sure it meets the following conditions:

  • It must have 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 must meet the minimum levels for auto enrolment
  • All employees who meet the auto enrolment criteria must be 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’re fully informed 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 the following information:

  • When your workplace pension scheme will be available for them to join
  • The 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

Any 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 within five months of your duties start date. You or someone on your behalf, like a financial adviser, can complete this.

If you don’t complete a declaration of compliance, The Pensions Regulator won’t consider your auto enrolment duties to be fulfilled, and you could be fined.

Step four

Perform your auto enrolment duties

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

  • Assess your staff each time they’re paid to see if any additional employees need to be auto-enrolled. This is so that you can make sure all eligible employees are enrolled onto your pension scheme. 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.
  • Establish membership for your eligible jobholders and anyone else who’s asked to join
  • Deal with employees who want to opt in or out of your scheme, or cease active membership
  • Pay contributions as calculated each time you pay 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 pension contributions you missed, as well as contributions on behalf of 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, as well as 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 better suit 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 inform The Pensions Regulator if they feel like 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

In order to avoid penalties or fines, you need to fulfil all of your auto enrolment duties. That means you need to:

  • 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 keep your employees informed of your auto enrolment duties
  • Auto-enrol all employees aged between 22 and their state pension age who meet the minimum earnings threshold
  • Opt out any employees who have chosen not to be part of the pension scheme, and refund any pension contributions that they’ve made. If you choose Aviva as your provider, we’ll accept and process opt-outs on your behalf, and pass back any relevant contributions for you 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 that these are paid 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 don’t do anything that leads directly to your employees opting out or ceasing contributions

Fines and penalties you could face

If you’re struggling to put a compliant workplace pension scheme in place, get in touch with The Pensions Regulator as soon as you can to let them know.

If you repeatedly fail 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. Legal action can be avoided as long as you actively take steps to fulfil your auto enrolment duties, and keep The Pensions Regulator informed along the way.

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 to provide the information they’ve requested, they may send a formal request for information. If on review of this information, The Pensions Regulator finds that you are in breach of your auto enrolment duties, you will be issued with a statutory notice that corresponds to the breach. If you fail to provide the requested information, or to comply with a statutory notice, you could be issued with a fixed penalty notice or escalating penalty notice. Persistent non-compliance may lead to prosecution. Find out more about each of these notices below, we’ve marked the statutory notices 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