Staff pensions and auto-enrolment
- Roger Clough
- Nov 25, 2024
- 2 min read
Since 2018, or earlier for larger employers, the default position for staff is for them to be opted in to pension contributions rather than having to ask them if they wish to opt in
Why:
People were not making enough provision for retirement, and opting people in to pension schemes automatically was seen as a way of addressing this, particularly amongst younger workers. People are indeed saving more towards their retirement as a result.
Do I have to contribute, as their employer?
Yes. As the employer you must contribute a minimum of 3% of the staff member’s gross wage, and they must contribute a minimum of 5%. You will need to deduct their 3% (or more if they choose) from their net pay and pay to a pension provider such as NEST, along with your employer contribution.
Does the money have to go to NEST?
No there are alternatives, but it must be paid into a scheme. Most small employers do seem to use NEST though (National Employment Savings Trust). The Pensions Regulator has a full list of pension schemes at www.tpr.gov.uk/choose
Does everyone need to be auto enrolled?
You can choose to auto enrol all staff, but staff only have to be enrolled if they earn over £833 per month (£192 per week) and are aged 22 or over
OK I’ve set up a scheme, what do I do next
Decide which staff should be in the scheme, and write to them within 6 weeks to let them know they are being enrolled unless they opt out. The Pensions Regulator has template letters for this at www.tpr.gov.uk/write-staff
Also you need to declare your compliance
If you don’t do this you could get a fine, even if you are compliant. This is made to the Pensions Regulator at www.tpr.gov.uk/declare-web
Then what?
After every pay run you need to submit the pension information to your pension provider and pay the funds to them, this I normally done by direct debit.
Sounds complicated – is it difficult?
Not once you get up and running, it just becomes a part of your payroll routine. If you outsource your payroll processing your payroll contractor will be used to the scheme and should be able to help you.
Can a company director be part of the scheme?
If they are salaried under PAYE they most certainly can, yes.
About the author
Dr Roger Clough, founder
Roger has a PhD in UK food retail change, has lectured extensively in business finance and accounting, and has run several businesses over three decades. As an AAT Licensed Accountant he likes to be on a journey with clients rather than the kind of accountant who just prepares the statutory accounts after the year end – meaning that advice can be given and decisions can be made before it is too late.
About Clough Accounting
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Roger Clough t/a Clough Accounting is an AAT Licensed Accountant
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