The Smart Pension platform helps you to ensure your clients can stay compliant with UK auto enrolment law
Our Adviser platform is for accountants, bookkeepers, payroll bureaus and payroll software providers, HR, and independent financial advisers.
We've designed it to help you manage a portfolio of clients, enabling them to set up a Smart Pension account that helps them meet their auto enrolment obligations. Simply sign them up and leave them to it, or manage their pension scheme for them.
Staging dates vs Duties Start Date
If a company is setting up a business now, then auto enrolment duties simply begin on the first day the employees start work. This is known as your Duties Start Date.
Auto enrolment staging dates were set by The Pensions Regulator, using PAYE scheme sizes as a way of defining who needed to be enrolled and when.
What are your clients’ pension duties?
The easiest way to understand new duties is to use The Pension Regulator’s tool. On the Duties Start Date (the first day as an employer), the employer must assess all of its employees. If you click on the link below, you'll be able to access the tool in a new window. This will let you come back to this page easily, to learn more about choosing a pension provider.
How can Smart Pension help my clients stay compliant?
We're a fintech company. Everything we do brings pensions experts and technology experts together, specifically to make compliance easier for your clients.
As each employer onboards their employees and sets up Smart Pension, our software can automatically work out what needs to happen next. Many things need to happen behind the scenes, such as sending out personalised letters about contributions. Our software
pays the right level of contributions
responds to requests for higher contributions within the right timeframe
manages adjustments to PAYE reporting
communicate clearly with employees as they approach retirement
assessing employees' qualifying earnings on a regular basis
Employers’ obligations: employers will have to automatically enrol these employees and contribute to their pension fund. The employee will have the right to opt-out. If this happens, the employer does not have to contribute.
Will Smart Pension help my clients with their declaration of compliance?
Yes. We can provide your clients with a list of things they’ll need to have to hand in order to complete their declaration of compliance. We will also need to provide them with information such as their unique EPSR number and the PSR number for the Smart Pension Master Trust. They’ll be provided with this information when they go to complete their declaration of compliance.
Who does the employer have to re-enrol – and when?
Once every three years, employers must re-enrol any staff who were members but have opted out or ceased membership since the automatic enrolment duties commenced or since the last re-enrolment date if more recent. You do not need to re-enrol an employee who meets one of the exceptions or exemptions above
How do you re-enrol?
There are four steps to this process:
1. Choosing a convenient re-enrolment date
The employer can decide when this happens (although they can't postpone re-enrolment). Most companies choose the beginning of a month or a date that aligns with their regular payroll cycle.
The day itself must occur within a six-month window that starts three months before the third anniversary of when automatic enrolment duties started and ends three months after it.
For example, if a pension scheme opened on 1st July 2019, then the third anniversary of that staging date would be 1st July 2022. The three-month window would run from 1st April 2022 to 30th September 2022, during which time all qualifying employees would need to re-enrol.
2. Assessing employees
Employers must work out who should be re-enrolled but only need to assess staff who have:
opted-out of the pension scheme
left the pension scheme after the end of the 'opt-out' period
stayed in the pension scheme but decided to reduce contributions below the minimum level, and meet the age and earnings criteria to be re-enrolled
Employers don't need to re-assess or re-enrol any staff member who, on the chosen re-enrolment date:
is already in the pension scheme used for auto enrolment
is under 21 years of age
is at State Pension Age (SPA) or over
has not yet met the age and earnings criteria for auto enrolment (less than 22 years of age and/or is earning less than £10,000 a year (£833 a month or £192 per week))
has opted out of the pension scheme within the last 12 months
Any employees who have resigned and are working their notice won’t need to be re-enrolled unless they or the employer retracts the notice, in which case the employees will need to be assessed for re-enrolment purposes.
Employers can decide if they'd like to automatically re-enrol any eligible jobholder who:
opted out or ceased active membership of a qualifying scheme (or a scheme that would, at the time, have been a qualifying scheme) at their own request less within the 12 months before the automatic re-re-enrolment date
was paid a winding-up lump sum within the 12 months before the automatic re-enrolment date while in your employment and then, during the 12 month period that started on the date the winding-up lump sum payment was made:
ceased employment and
was subsequently re-employed by the company
gave notice to end their employment (resignation or retirement) or was given notice of dismissal
has primary, enhanced, fixed or individual charges on their pension savings
holds the office of Director within the company
is a partner in a Limited Liability Partnership that is their employer, and is not treated for Income Tax purposes as falling within HMRC's 'salaried member' rules
If there are staff meeting those criteria, then they must be re-enrolled. If a pension scheme has been running for some time, it’s worth noting that some employees might not have met those criteria at the last re-enrolment date, but do so now.
If none of the employees need to be re-enrolled, then there is nothing to do except complete a re-declaration of compliance.
If there are employees who need to be re-enrolled, then they must be put back into a qualifying auto enrolment scheme and start paying into it.
3. Tell employees about re-enrolment
It’s a legal requirement to let employees know if they’re going to be re-enrolled – and what their rights are if they want to opt out – within six weeks of the re-enrolment date.
There's no need to contact employees who aren't being re-enrolled.
Any communications can come directly from the employer or the payroll provider, or – if Smart Pension is in place – we can do it automatically.
4. Completing a new declaration of compliance
The Pensions Regulator asks for a new declaration of compliance that confirms compliance with the pension regulations.
This needs to happen within five months of the third anniversary of the date automatic enrolment duties started, and within five months of each subsequent re-enrolment date. However, declarations can also be made as soon as employees are re-enrolled (or as soon as it becomes apparent there are none to re-enrol).
Usually, a re-declaration confirms how many employees are in the scheme, along with how many are being re-enrolled, and how many are exempt or otherwise not being re-enrolled. If a third party completes and/or submits a re-declaration of compliance for the employer, it’s still the employer's legal responsibility to make everything happen as it should do before the deadline.
Smart Pension makes automatic enrolment easier
Every company with staff in the UK or ordinarily working in the UK must enrol those employees automatically in a pension scheme. It’s the employer's legal responsibility to let their employees know about auto enrolment and how it affects them.
Employers must manage that enrolment process, but Smart Pension offers everything needed to meet legal obligations in setting up and managing a pension scheme for employees.
In addition, we automatically provide all the compliant communications needed to meet auto enrolment obligations.
Where can I learn more about auto enrolment compliance and penalties?
The Pensions Regulator tries to provide as much practical advice as possible to help employers stay compliant. It has an excellent website. If you’d like to visit the Regulator’s website, this button opens the website in a new window, so you can refer back to our site at the same time.
Can The Pensions Regulator check up on my clients?
Yes. If the Regulator wants to, it can visit an office to inspect a pension scheme. It can also ask the employer to prove the right employees are being enrolled automatically, and that communications are being prepared and records being maintained.
This is why it's important to have a pension scheme that can assist with your responsibilities.
The Pensions Regulator has a variety of powers to investigate, including the power to issue formal notices requesting information, inspection powers, or to issue statutory notices where an employer has failed to meet its duties.
If The Pensions Regulator isn’t satisfied with the way a company is running a scheme, then it may issue a Compliance Notice, an Improvement Notice, or an Unpaid Contributions Notice. These notices outline a problem that must be addressed.
The Pensions Regulator may also estimate any unpaid contributions, charge interest on them, and recover unpaid contributions on behalf of scheme managers and trustees. And if the Regulator believes a company hasn't complied with its obligations, it can issue a penalty notice and a fine. These notices include:
a Fixed Penalty Notice with a fixed fine of £400;
an Escalating Penalty Notice that charges £50 to £10,000 for every day you are non-compliant depending on how many employees there are have in the PAYE scheme
a Prohibited Recruitment Conduct Penalty Notice with a maximum fine of £5,000
a Civil Penalty Notice for non-payment of contributions, of up to £5,000 per individual and £50,000 per organisation
Unpaid Contributions Notice - this requires you to pay unpaid contributions plus interest and may make the employer liable to pay the employees' contributions which are overdue.
If a company fails to pay a penalty, the Regulator can take legal action to recover it. If the company remains non-compliant, the Directors may face prosecution and prison term of up to two years - so it’s easy to see the value of choosing the right workplace pension provider.
How to stay compliant
To avoid receiving penalties or enforcement action from The Pensions Regulator, a company must set up and run a compliant workplace pension scheme. They must:
write to employees about their rights including:
1. information about opting out or ceasing membership
2. information about joining and opting in
3. if you’re using postponement
automatically enrol all eligible employees into a suitable pension scheme and make contributions
put any non-eligible employees who decide to opt in, into the pension scheme and make contributions
make sure eligible employees who want to opt out are removed and, where it’s appropriate, refund their contributions
submit a Declaration of Compliance to the Regulator
re-enrol relevant employees if they have been postponed or ceased employment in the last three years
Who should be enrolled?
Employees fall into one of three categories:
non-eligible jobholders or
Eligible jobholders are employees who are:
between 22 years and state pension age
usually working in the UK under their contract of employment
between 16 and 21 OR between the state pension age and 74
earning the minimum amount eligible for auto enrolment
Employers’ obligations: they won't have to automatically enrol these employees, but those employees can join but, if they do, then employers have to make contributions to their pension fund. The employer must take reasonable steps to make deductions from the member’s salary and pay these to the selected pension scheme.
Employers’ obligations: they won't have to automatically enrol these employees. Employees can join but, if they do, employers are under no obligation to contribute to their pension fund. The employer must take reasonable steps to make deductions from the members salary and pay these to the selected pension scheme.
Smart can assist you with assessing your workers and continuing to monitor workers who have not met the requirement to be automatically enrolled each time you submit a file to us.
Understanding qualifying earnings
You will need to assess your employees using their qualifying earnings. Qualifying earnings include the following:
statutory sick pay
statutory maternity pay
ordinary or additional statutory paternity pay
statutory adoption pay
large town allowance
some P11D benefits (although expenses like food, travel or car allowance are excluded)
Decide what salary you should use to calculate contributions
Once the employer has determined which employees need to be enrolled, it's their responsibility to calculate how much should be deducted from a member's salary and contributed to each member's pension. Before that happens, the employer has to decide what earnings they will use to calculate contributions on. We permit either banded or unbanded earnings.
With banded earnings, there are upper and lower limits, known as thresholds, of £6,240 and £50,270 (2022-2023 tax year). You do not have to calculate contributions on earnings above or below the band.
With unbanded earnings, the employer will be working out contributions as a percentage of the employees' total earnings (the total amount they take home, assuming an employee is not an entitled worker) or other method with no lower floor.
What are the minimum contributions I have to pay?
If you are using banded earnings, you must pay at least 3% of the employees banded earnings although you can pay more.
The total that must be paid is 8% of banded earnings and therefore, if the employer only pays 3%, the member makes up the difference.
The following people are exempt from being automatically enrolled:
a company with a sole Director with no other staff working for the company
a company with more than one Director without an employment contract
the only people working for a company are Directors and none of them have an employment contract (if more than one Director has an employment contract then automatic enrolment applies)
a company that doesn't employ any staff because it has ceased trading, has gone into liquidation or been dissolved at Companies House
A company may also ignore the following workers in the following circumstances:
a member who has opted out or ceased active membership of a qualifying scheme
a member who has given notice or been given notice of the end of their employment
a member where the employer has reasonable grounds to believe the worker is protected from tax charges on their pension savings under HMRC’s primary, enhanced, fixed or individual protection requirements
a member who holds the office of a director of the employer
a member who is a member (partner) of a Limited Liability partnership and is not treated for income tax purposes as being employed by that limited liability partnership under section 863A of the Income Tax (Trading and other Income) Act 2005 (HMRC’s salaried members rules)
a member who has been paid a winding up lump sum payment whilst in the employment of the employer, and during the 12 month period that started on the date the payment was made, the worker:
i. ceased employment with the employer after the payment has been paid, and
ii. was subsequently re-employed by the same employer
a member who meets the definition of a ‘qualifying person’ for the purposes of separate UK legislation on occupational pension schemes and cross-border activities within the European Union
Talking to employees about auto enrolment
If you don’t want to manage the communication duties of automatic enrolment the Smart Pension platform can handle it for you. If we have email addresses for your employees we will email them providing all the information they need to know about automatic enrolment including:
letting new staff know if they meet the criteria for auto enrolment
Informing new employees about auto enrolment and how it affects them
letting them know if they have a right to opt-out
letting them know if they have a right to opt-in or join
telling them what contributions will be made on their behalf and what they will be paying.
whether you are using postponement
If we do not have their email address we can still prepare these communications for you but you will need to print them off and give them to your employees.
We also allow you to retain the records of what communications have been issued and when so that you can provide the audit trail should the Regulator require this.
We also provide plain English communications including:
an annual benefit statement showing the value of each member's account at the end of the scheme year and what it may be worth when they come to retire
providing details about choices as your employees approach retirement
updating employees about any changes in tax benefits or regulation
staying in touch with reports on pension savings and performance
By choosing a pension scheme provider like Smart Pension, the administrative task of composing and distributing communications to all staff can be done for you automatically.
Choosing a pension provider
As The Pensions Regulator explains, if a company needs to set up a pension scheme to handle auto enrolment then it has to choose a pension provider.
For new employers, small companies in particular, this can be daunting – but Smart Pension makes it easy to set up and run a scheme, even if the company is only employing three or four people.
What happens if a company misses its Duties Start Date?
If a company misses its Duties Start Date, then it may need to backdate contributions for employees that should have been auto enrolled already.
If less than six weeks have passed
Depending on which pension provider is chosen, it can take a few weeks to set up a scheme. By comparison, we believe Smart Pension is quick and easy to get set up – often in just a few hours.
As soon as your client has chosen a pension provider, the team needs to enrol the employees who meet the auto enrolment criteria. If less than six weeks have passed since the Duties Start Date, then the employer will have to backdate those employees’ scheme membership to the day they first met the age and earnings criteria. The employer may also need to backdate contributions.
The alternative is to use ‘postponement’, which enables assessment to be postponed for up to three months. When an employer chooses postponement, it doesn’t need to backdate contributions. The employer can then postpone auto enrolment (the process, not its responsibilities) from:
An employee’s first day of employment
The day on which the Duties Start Date became effective
The date an employee first becomes eligible for auto enrolment
An employer can only choose postponement if the company is within six weeks of the date it became eligible to auto enrol employees.
An employee will have the right to opt-in during the postponement window, and if they do, the employer will need to assess them and enrol them from that point.
If more than six weeks have passed
If more than six weeks have passed since the Duties Start Date, then the employer will have to pay any contributions that should have been made back to the date employees met the age and earnings criteria for the scheme.
As you can see, it's important to choose a pension provider that can help clients to get set up quickly.