Auto-enrolment

An auto-enrolment Pension Scheme:

  • has no requirement for the member to provide information
  • has no barrier to entry.

Auto-enrolment is an obligation on all employers to enrol eligible employees in a workplace pension scheme unless they are already a member of a Qualifying Scheme.

A Qualifying Scheme is either a personal pension scheme or an occupational pension scheme which meets the charges cap of 0.75% pa for all charges (including the costs of a stated default investment fund), and into which the level of contributions are being paid.

The date from which employers will need to do this varies and is called the 'staging date'. The earliest staging date was in October 2012 and employers’ staging dates can be found on The Pension Regulator's website.

The Basics

From their 'staging date', all employers will have to auto enrol employees who are:

  • Aged between 22 and State Pension age
  • Earning more than the 'earnings trigger' in each pay reference period. Depending on the structure of the pay reference periods, the earnings trigger will be £192 if employees are paid weekly, £833 monthly and £10,000 annually for 2021/22
  • Not currently in a Qualifying Scheme.

Employers will be able to delay auto-enrolment of new employees for up to three months from the date they join service. This also applies to employees whose income is initially below the earnings trigger, but subsequently exceeds it.

The scheme must satisfy a minimum contribution test. The minimum required contribution is based on a band of earnings falling between £6,240 and £50,270 pa in 2021/22. This will be made up of an employer’s contribution of at least 3% and a personal contribution of 5%.

Alternative minimum contribution levels apply to existing schemes where the employer uses a different definition of earnings, known as pensionable salary (rather than qualifying earnings), and these minima will be dependent on the 'tier' (or 'set') that is used.

Employers will also have an ongoing duty to maintain qualifying pension provision for employees who are already members of a Qualifying Scheme or become members of such schemes.

National Workplace Pension Schemes

In addition to the traditional schemes, a number of providers have developed Qualifying Scheme solutions that are aimed at low to moderate earners and their employers. The providers offering this type of scheme are:

  • NEST
  • The People's Pension.

The value of a pension will be directly linked to the performance of the funds you select and the value can therefore go down as well as up. You may get back less than you initially invested.

Got a question?

If you would like to speak to us about a particular issue or wish to find out more about the specialist advice services we offer for business owners, please get in touch.