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Pension Auto Enrolment update

August 30, 2016
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Pension Auto Enrolment update


The number of businesses required to automatically enrol into a pension scheme is set to peak over the next 18 months, with an estimated 1.8 million small (5-49 staff) and micro (1-4 staff) employers now being required to take action.  A recent government ad campaign, featuring a giant furry creature, has been run to help increase awareness.

Auto Enrolment is a legal requirement for all employers to provide a pension meeting minimum standards, and is being phased in over the period 2012 to 2018 dependent on the size of the employer. All employees over the age of 22 and below state pension age, who ordinarily work in the UK, and who earn over a certain amount every week or month, must be enrolled into a pension scheme.

It is worthwhile focusing on a few common issues for small employers.

Director only companies

A significant number of businesses are companies with one director and no staff, such companies do not have auto-enrolment duties.   If you believe you don’t have any automatic enrolment duties you will need to tell The Pensions Regulator that you’re not an employer – this can be done by completing the duties checker on the Regulator’s website.

Where a company has more than one director and no other staff, it will only be an employer for the purposes of automatic enrolment if more than one of the directors has a contract of employment with the company. Unless a company tells the The Pensions Regulator (TPR) that its directors do not have contracts of employment there is an assumption it is an employer with automatic enrolment duties, and the enrolment requirements apply.

Micro employers

Businesses that employ only one member of staff, who is employed on a temporary basis, who earns under the qualifying earnings threshold (currently £10,000) and who does not need to be automatically enrolled will still have automatic enrolment duties.

If you do not have any workers to automatically enrol, you still need to write to them to tell them about automatic enrolment and how it applies to them. Template letters that you can use are available on the Regulator’s website.

Declaration of compliance

The Pensions Regulator writes to all employers to alert them to their duties 12 months before their staging date. The staging date is the date when employers’ legal duties start.

A declaration of compliance must be completed and submitted to The Pensions Regulator within 5 months of the staging date.  This confirms how the employer has met its legal duties, and must be completed whether or not there are workers who must be put into a scheme.  It is this duty that businesses are often failing to do.

Failure to meet this duty will result in a number of enforcement measures being instigated by The Pensions Regulator, ranging from warning letters setting out a timeframe to meet the compliance requirements to fines or Court action for persistent or deliberate non-compliance.

It is worth noting that an employer can choose to complete its declaration of compliance at the same time as its staging date. Completing your declaration early means you can get this task out of the way and won’t run the risk of failing in your duties. If you decide not to do this, you must complete your declaration within five months after your staging date.

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