Pensions and automatic enrolment

It has recently been reported in the press that the first fines have been levied after a prosecution by the Pensions Regulator for the failure to comply with the new laws on workplace pensions.

Both a director, and his company have been fined a total of more than £31,000 for wilfully avoiding setting up a scheme and thereby not paying minimum employer pension contributions. The maximum penalties are an unlimited fine or imprisonment upon conviction. The guilty company failed to register 36 people. The Regulator has stated that “enrolment is not an option, it is the law.”

In view of the potential penalties it is worth re-iterating the rules: –

  • All employers with a PAYE scheme must provide a workplace pension scheme and make contributions into it for all employees classed as “workers”, aged between 22 and State Pension Age, earning at least £10,000 per year and usually working in the UK.
  • There are a few other exemptions to the above, for example if notice has been given by either party of the employee leaving the job, the employee has evidence of their lifetime allowance protection, you’re a director without an employment contract, you’re a member of an LLP, you’re from another EU member state and are in a EU cross-border pension scheme, or you’ve already taken a pension arranged through your employer, more than 12 months before your staging date you left or opted out of your employer’s pension scheme.
  • The amount the employee, the employer and the government pays towards the pension will depend on the pension scheme chosen by the employer, and the qualifying earnings of the employee.

Blog written by: Nigel Kalb

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