On 1 October 2012 the Government introduced legislation making it compulsory for all employers to enrol eligible workers into a qualifying workplace pension scheme.
Automatic enrolment means that, rather than having to actively choose to join a pension scheme, staff are put into one by their employer, if they meet certain criteria. If they don’t want to be in the pension scheme, they must actively choose to opt out. This is to encourage people to stay in pension saving.
Our step by step guide will help you find out what you’ll need to do and when.
The first thing you should do is find out your staging date. This is the date you need to comply with your automatic enrolment duties. The Pensions Regulator will write to you telling you what your staging date is, or you can find out your staging date by entering your PAYE reference into the Pensions Regulator’s Staging Date Calculator.
If you are a new business, starting from October 2017, you will have instant pension duties as soon as you take on a member of staff. Rather than having a set staging date, auto-enrolment duties will start as soon as you employ someone. Click here to read The Pensions Regulator guidance on what new businesses need to do.
From 8 December 2022 any new employers who want to join the pension scheme must apply to join Cushon Master Trust. To join this pension scheme click on the Sign up today button above and fill in the online form.
We suggest that you make an assessment of your workforce in advance of your staging date. This is so you get an idea of who you'll have to enrol and the cost of contributions. You will have to do a formal assessment on your staging date (or after postponement) so you know exactly who you’ll have to automatically enrol and the contributions due.
The minimum level of pension contribution is shown in the table below:
| Date | Employer Minimum Contribution | Employee Contribution | Total Minimum Contribution |
|---|---|---|---|
| Current rate: 6 April 2019 onwards | 3% | 5% | 8% |
| Previous rate: 6 April 2018 to 5 April 2019 |
2% | 3% | 5% |
Your workforce will fall into one of the following categories:
| Age 22-State Pension Age | Below Age 22 or over State Pension Age |
|---|---|
| Entitled Worker Earns less than £6,240 a year Can ask to be enrolled Not entitled to employer contributions |
Entitled Worker Earns less than £6,240 a year Can ask to be enrolled Not entitled to employer contributions |
| Non-Eligible Jobholder Earns £6,240 - £10,000 Can ask to be enrolled Entitled to employer contributions |
Non-Eligible Jobholder Earns over £6,240 a year Can ask to be enrolled Entitled to employer contributions |
| Eligible Jobholder Earns £10,000 & over Must be automatically enrolled Entitled to Employer Contributions |
The following calculation is an illustrative example only. It is based on an ‘Eligible Jobholder’ contribution rates as at April 2024 and uses ‘qualifying earnings’ as the earnings basis to calculate contributions. Qualifying earnings is the name given to a band of earnings used to calculate contributions for auto enrolment. For the 2024/25 tax year this is between £6,240 and £50,270 a year (or £120 and £967 a week, £520 and £4,189 monthly). Qualifying earnings include salary or wages, commission, bonuses, overtime payments, statutory sick pay, statutory maternity pay, ordinary or additional statutory paternity pay and statutory adoption pay.
| Gross Weekly Wage | £350.00 |
| Less Lower Earnings Limit 2024/25 | -£120.00 |
| Pensionable Pay | £230.00 |
| Employer Contribution | £6.90 |
| Employee Contribution | £11.50 |
| Gross Monthly Wage | £1500.00 |
| Less Lower Earnings Limit 2024/25 | -£520.00 |
| Pensionable Pay | £980.00 |
| Employer Contribution | £29.40 |
| Employee Contribution | £49.00 |
Employees may receive tax relief on their pension contributions through the net pay arrangement. The employer deducts the pension contributions from the employee’s gross pay, before PAYE tax is deducted. Using this method, the employee automatically receives tax relief straightaway at their marginal rate.
Alex pays 20% tax.
£10 goes from his wages into his pension pot, before any tax is taken. This reduces his taxable earnings by £10 and he pays £2 less in income tax.
This means he has received £2 tax relief from the government. His take home pay is reduced by £8 but £10 has gone into his pension pot.
Employees earning less than £12,570 (April 2024) won’t receive tax relief under the net pay arrangement because they don’t earn enough to pay tax.
It is important that you get your payroll system and processes ready ahead of your duties start date.
You will need to liaise with your payroll provider to check that it is ready to carry out automatic enrolment tasks such as monitoring employee ages and earnings to make sure you’re paying the right amounts and that you can create contribution reports.
To avoid any miscalculations or errors you will need to check that the contribution basis is set up correctly. Workers Pension uses the net pay arrangement for tax relief. This means that contributions are deducted from gross pay (before tax). Ensure that your payroll is set up to deduct contributions using the net pay arrangement.
At each pay run you must produce a report of pension contributions in the format required by Workers Pension. The pension contribution report is generated from your payroll software and uploaded to your online account on a monthly basis. Ensure that your payroll is set up to produce a pension contribution report.
You have a legal responsibility to inform your employees about auto-enrolment. This includes those who don’t need to be automatically put into the pension scheme, as they still have the option to join if they want to. It is your responsibility to make sure your employees are given the correct information at the right time. We suggest that you inform workers early so they know when automatic enrolment is happening. To raise awareness and help workers understand automatic enrolment we have created these documents to help you communicate with staff.
Our Changes to Workplace Pensions Leaflet will help to inform workers about automatic enrolment.
You must write to Eligible Jobholders to tell them they’ve been automatically enrolled and that they have a right to ‘opt out’ of the pension scheme. You will need to do this when an employee becomes eligible for automatic enrolment for the first time, or with any new starters who are eligible. Click here to view the template Eligible Jobholder Letter & Enclosure.
You must also write to non-eligible and entitled workers to inform them that they have not been auto-enrolled and that they have the right to join the pension scheme. If they decide to join the pension scheme and fall into the Non-Eligible category, the employer is also obliged to contribute. If they fall into the Entitled category the employer is not obliged to contribute. Click here to view the template Non-Eligible & Entitled Worker Letter.
The Pensions Regulator has now provided translated versions of their automatic enrolment letter templates. Employers may use these letters to write to their staff to explain how automatic enrolment applies to them. Translations are available in Bulgarian, Chinese (Mandarin and Cantonese), Latvian, Lithuanian, Polish, Romanian, Spanish and Welsh.
Postponement gives an employer the flexibility to align the administration of the employer duties to their existing business and payroll processes. Postponement is optional and is described as ‘postponement of automatic enrolment’ or is sometimes referred to as a ‘waiting period’. If you have decided to postpone automatic enrolment for any of your staff, you must write to these staff to tell them.
Staff have a right to opt in to your pension scheme during the postponement period. Click here to view the template Postponement Letter. More information about postponement is available on the Pensions Regulators website.
You will use our secure online portal to submit your employee data. You should ensure that staff records are up to date as part of your general preparations for automatic enrolment. You will also use the online portal to add contributions for staff members eligible for auto-enrolment and remove those employees who have left. Each month you will be required to upload a file of pension contributions to your online account. Contributions are invested in a Member Account in the employee’s name.
Staff who have been auto-enrolled have the right to opt-out during the opt-out period. Download our Opt Out Process Flow Chart.
It is against the law for employers to encourage or offer inducements to employees to opt out of pension saving. Staff not eligible for automatic enrolment can ask to opt-in to, or join, the pension scheme. In this case you will need to hold written confirmation from the employee that they want to join. You can then add the employee to the Scheme through your online account.
You must declare your compliance with the Pensions Regulator within five months of your staging date. Click on this link to complete your Declaration of Compliance.
An employer’s declaration is mandatory and failure to complete it on time means that you will not have met all of your duties, which could result in fines and/or prosecution.
Click here for further information to help you complete the Declaration of Compliance.
Your automatic enrolment duties don’t stop once you’ve enrolled all your staff – they become part of your business as usual. You will need to monitor any changes in age and earnings of your staff so you can identify if they become eligible for automatic enrolment. You must also check the eligibility of any new member of staff.
You must keep up-to-date records about your staff, including who you have automatically enrolled and when, information about your pension scheme, and the contributions you are paying.
Every three years, you will need to re-enrol those staff who had opted out back into your automatic enrolment pension scheme, provided they are still eligible. You can find more information regarding re-enrolment on the Employers Guide to Re-enrolment page.
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