Pensions and Auto enrolment
Under the Pensions Act in 2008, every employer in the UK must put eligible staff into a workplace pensions scheme and contribute towards it.
There are two important dates- the duties start date and the declaration of compliance deadline.
The duties start date is the date your first member of staff starts working for you, meaning that it is your legal responsibility to put eligible staff into the pension scheme and start paying any contributions on the next payday after this.
The declaration of compliance deadline is the date by which you must tell the pensions regulator how you have met your legal duties. You have to do this regardless of whether your staff are eligible for the scheme or not.
Most workers in the UK are enrolled in an “opt out” scheme with state pensions. Contributions are automatically deducted from a worker’s pay as long as they are employed until they take their savings. The eligibility criteria are as follows:
- Any jobholder who earns over £10,000 a year (over the age of 22 and under state pension age) is automatically enrolled and is entitled to employer contributions.
- Anyone who earns under £10,00 but more than £6,240 can ask to be enrolled into state pension schemes and is entitled to employer contributions.
- Anyone who earns under £6,240 a year can ask to be enrolled into the scheme but is not eligible for employer contributions.
Minimum contributions to a worker’s pension pot are worked out by “qualifying earnings” which are a section of the worker’s pay. The band is reviewed annually by the Government, and for the 2021/22 tax year was everything between £6,240 to £50,270 a year. The contribution rate is 5% with 1% being paid by HMRC as a basic tax relief.
For employers, the minimum contribution rate to a worker’s pension is currently 3% within this bracket, making the total minimum contribution 8%. (3% by employers, 4% by workers, 1% by HMRC)
