Yes. The government introduced legislation expecting all employers with staff in the UK or ordinarily working in the UK to assess and enrol eligible jobholders into an approved pension scheme. Generally, this is known as auto enrolment.
You must enrol eligible jobholders and employees who want to opt-in into in a pension scheme that meets The Pension Regulator’s expectations for auto enrolment. It’s also the responsibility of each employer to tell employees about the company’s auto enrolment scheme and write to them to let them know how it will affect them – but we can help you to do that.
We can also help you to stay compliant with your submissions, and our Smart platform was designed to make all of these processes easier.
Employers have to manage automatic enrolment from start to finish (employees can’t automatically enrol themselves in a workplace pension scheme). Smart Pension offers everything you need to meet your legal obligations in setting up and managing a workplace pension for your employees.
What are the penalties for auto enrolment non-compliance?
If you’re not running an auto enrolment scheme properly then you may not be compliant. The Pensions Regulator tries to provide as much practical advice as possible to help you manage your scheme well. 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 business?
Yes. If the Regulator wants to, it can visit your offices to see how you're running your scheme, and ask you to prove you’re enrolling the right employees automatically. This is why it's important to choose a pension scheme provider that can help you stay compliant.
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 you’re running a pension scheme, then it may issue a Compliance Notice, an Improvement Notice, or an Unpaid Contributions Notice. These notices let you know there’s a problem that you need to address.
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 that you haven’t complied with your obligations, then 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 you 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 you fail to pay a penalty, the Regulator can take legal action to recover it from you. If you remain non-compliant, you could face prosecution and prison term of up to two years - so it’s easy to see the value of choosing the right pension provider.
How do I avoid getting a penalty?
To avoid receiving penalties or enforcement action from The Pensions Regulator, you must set up and run a compliant workplace pension scheme. This includes:
providing employees with information about your duties
automatically enrolling all eligible employees into a suitable pension scheme and making contributions
putting any non-eligible employees who decide to opt in, into the pension scheme and make contributions
writing to your employees who have been automatically enrolled and letting them know their choices about opting out
making sure eligible employees who want to opt out are removed and, where it’s appropriate, refunding their contributions
submitting a declaration of compliance to the Regulator
if postponing automatic enrolment, providing employees with information of when they will be enrolled and their rights within 6 weeks of when they were assessed
automatically re-enrolling eligible employees about every three years
keeping records of assessment, enrolment, opt-ins, re-enrolment and contributions for at least 6 years
keeping records of opt-outs and ceased memberships for 4 years
Smart Pension can help you to avoid a penalty
With Smart Pension, you'll have the support of pension and technology experts. Our software does the hard work for you – managing your scheme behind the scenes, communicating with employees, helping you to stay compliant. It will:
assess the information you give us about your workforce to let you know who should be enrolled
enable you to upload their details via your payroll provider, or a spreadsheet or other format
create letters with your company logo to send out to employees
produce an employee information video for you
give your employees the chance to manage their opt in or out status themselves
automatically works out the contributions you need to make to employees’ savings and them into the pension scheme.
How can Smart Pension help me be compliant?
As you set up and enrol your employees into a Smart Pension, our software automatically works out what needs to happen next. Many things need to happen behind the scenes, such as sending out personalised letters about being automatically enrolled and a members rights. We take care of it all including:
helping you to be sure you're paying the right level of contributions
responding to requests for higher contributions within the right timeframe
managing adjustments to PAYE reporting
communicating clearly with employees as they approach retirement
assessing your employees' qualifying earnings on a regular basis
providing you with your EPSR number, the Smart Pension Master Trust PSR number and details of the type of scheme we operate – all of which are needed to complete your declaration of compliance, which is your legal responsibility
Who qualifies for enrolment?
Workers will fall into one of three categories. They may be eligible jobholders, non-eligible jobholders, or entitled workers. Employees' classifications may change over time and, depending on how they're classified, you'll have different ongoing auto enrolment duties. This is where the Smart Pension platform will help – saving time, money (and stress levels) by doing the assessments for you, automatically, using your payroll data.
Eligible jobholders are employees who are:
between 22 years and state pension age
usually working in the UK under their contract of employment
being paid over £10,000 per annum, £833 monthly or £192 weekly (current tax year 2023-2024)
Your obligation: unless the employee opts out, you have to automatically enrol these employees and, unless the employee opts out, contribute to their pension fund.
Non-eligible jobholders are employees who are:
usually working in the UK
between 16 and 74 (inclusive)
earning less than the amount needed to be eligible for auto enrolment but more than the lower earnings threshold (more than £6,240 annually, £520 monthly or £120 weekly but no more than £10,000 annually in the 2023-2024 tax year).
usually working in the UK
between 16 and 21 (inclusive) OR between the state pension age and 74
earning the minimum amount eligible for auto enrolment
Your obligation: you don't have to automatically enrol these employees, but they can opt in. If they opt in, then you have to make contributions to their pension fund.
Entitled workers are employees who are:
working in the UK
between 16 and 74
earning the qualifying lower earnings threshold or less (£6,240 annually, £520 monthly, or £120 weekly for the 2023-2024 tax year)
Your obligation: you don't have to automatically enrol these employees. They can opt in but, if they do, you're under no obligation to contribute to their pension fund.
Understanding qualifying earnings
It's your responsibility to work out how much you should be contributing to your employees' pensions by doing a calculation on qualifying earnings. Before you do that, you have to decide which basis you'll use – banded or unbanded earnings. If you choose:
banded earnings, then you'll have upper and lower limits, known as thresholds, of £6,240 and £50,270 (these figures may change in each new tax year)
unbanded earnings, then you'll be working out contributions as a percentage of your employees' total qualifying earnings (the total amount they take home, assuming the employee is not an entitled worker)
If you've chosen to use banded earnings, then qualifying earnings (the amount you'll use to work out your contribution) in the tax year 2023-2024 are the take-home pay between £6,240 and £50,270. This includes:
statutory sick pay
statutory maternity pay
ordinary or additional statutory paternity pay
statutory adoption pay
large town allowance
some P11D benefits
Which employers are exempt from auto enrolment?
A company can be exempt from auto enrolment duties if its staff comprises only directors. In this situation, you are not legally required to operate an auto enrolment pension scheme because you are not considered to be an employer. However, other duties may continue to apply such as communication obligations. The following are reasons why a company may be exempt from auto enrolment duties by reason of director exemption:
there is only one director and there are no other employees working for the company
the only people working for the company are directors and none of them has an employment contract
the only people working for the company are directors and only one of them has an employment contract
the company does not or no longer employs any workers because it has ceased trading, gone into liquidation or been dissolved
Talking to your employees about auto enrolment
Our platform sends letters and notifications out automatically, helping you stay compliant. It's important to stay on top of these communications, because your employees need regular updates about their pension savings, how their money is doing, and what their options are. Many of the notices and letters that need to go out happen as the result of a change to an employee’s contributions. If they ask to boost their savings, for example, or change their mind about who should receive their funds when they die.
The Smart Pension platform handles all of those letters and notifications for you. However, if we do not have a valid email address for your employees, it is your responsibility to make sure the letters are printed and given to the employees.
The Smart Pension Platform also provides template letters that will help you to stay compliant with The Pensions Regulator. These include:
letting new staff know if they meet the criteria for auto enrolment
informing new employees about auto enrolment and how it affects them
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 is made easier for you.
Who do I have to re-enrol – and when?
Once every three years, you will have to re-enrol any employees who have opted out or have ceased membership of the scheme. There are four steps to this process.
1. Choosing a convenient re-enrolment date
You can decide when you'd like to do this (although you can't use postponement at re-enrolment). Most companies choose the beginning of a month or a date that aligns with your regular payroll cycle.
The day itself must occur within a six-month window that starts three months before the third anniversary of when your automatic enrolment duties started and ends three months after it. For example, if your automatic enrolment duties started on (or subsequent re-enrolment took place) on 1st July 2021, then the third anniversary of that staging date would be 1st July 2024. The three-month window would run from 1st April 2024 to 30th September 2024, during which time you would need to re-enrol all qualifying employees.
2. Assessing your employees
You need to work out who should be re-enrolled, but you only need to assess staff who have:
opted-out of your pension scheme
left your 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
You can decide if you’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:
has given you notice to end their employment (resignation or retirement) or been given notice of dismissal
has primary, enhanced, fixed or individual charges on their pension savings
holds the office of Director within your 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 you do have staff meeting those criteria, then you must re-enrol them. If you’ve been running a pension scheme 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 your employees need to be re-enrolled, then you don’t need to do anything except complete a re-declaration of compliance. If you do have employees who need to be re-enrolled, then you have to put them 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 you to make a new declaration of compliance that confirms you’re still complying with the pension regulations.
This needs to happen within five months of the third anniversary of the date your automatic enrolment duties started, and within five months of each subsequent re-enrolment date. However, you can also make your declaration as soon as you’ve re-enrolled your employees or as soon as you work out there are none to re-enrol – you don’t have to wait.
Usually, a re-declaration confirms how many employees are in your 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 you, then it’s your legal responsibility, not theirs, to make everything happens as it should do before the deadline.
Staging dates vs Duties Start Date
If you’re setting up a business now, then your auto enrolment duties simply begin on the first day your 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 pension duties?
The easiest way to understand your new duties is to use The Pension Regulator’s tool. On your Duties Start Date (your first day as an employer), you must assess all of your employees. If you’d like to use the tool, we can open it in a new window for you. This will let you come back to this page easily, to learn more about choosing a pension provider.
As The Pensions Regulator explains, if you need to set up a pension scheme that can handle auto enrolment then you’ll have to choose a pension scheme 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 you’re only employing three or four people.
What happens if you miss your Duties Start Date?
If you miss your Duties Start Date, then you 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 you choose, it can take a few weeks to set up your scheme. By comparison, we believe Smart Pension is quick and easy to get set up – often in just a few hours.
As soon as you’ve chosen a pension provider, you will enrol the employees who meet the auto enrolment criteria. If less than six weeks have passed since your Duties Start Date, then you will have to backdate those employees’ scheme membership to the day they first met the age and earnings criteria. You may also need to backdate contributions.
The alternative is to use ‘postponement' (see more on auto enrolment postponement below). If you choose to postpone, you won’t need to backdate contributions.
If more than six weeks have passed
If more than six weeks have passed since your Duties Start Date, then you’ll have to pay any contributions that should have been made back to the date your employees met the age and earnings criteria for the scheme.
As you can see, it's important to choose a pension provider that will help you to get set up quickly.
Postponement – what is it? and how and when to use it
Auto enrolment postponement is sometimes referred to as a 'waiting period', and allows you to delay your new pension duties for up to three months from specific dates:
the day on which your Duties Start Date became effective
an employee’s first day of employment
the date an employee first becomes eligible for auto enrolment.
If you choose to postpone, you must write to your employees within six weeks of your Duties Start Date.
Why postpone auto enrolment?
You may wish to postpone your auto enrolment duties to give yourself some flexibility when it comes to aligning your new duties with existing business and payroll processes. Postponement can be particularly helpful when it comes to managing the administrative side of the business.
Does postponing auto enrolment change the deadline for the declaration of compliance?
Irrespective of whether or not you have postponed the assessment of workers, you are required to submit your declaration of compliance to The Pensions Regulator within five months of your Duties Start Date.
Can an employee opt-in during a postponement period?
Your employee has the right to opt-in during the postponement period and you need to make them aware that they are entitled to do so. You are required to check the level of qualifying earnings of your employee to determine whether they are a jobholder or entitled worker, and you must make contributions to the employee's pension if they are a jobholder.