Every employee based in the UK aged 22 but below state pension age earning at least £10,000 a year must be enrolled in a workplace pension by law. It’s your job to check whether an employee’s eligible to join the pension scheme and automatically enrol them.
Once enrolled, at least 2% (due to rise to 3% in April 2019) of their ‘qualifying earnings’ have to be paid into the scheme every year by you, usually monthly. If you’re not sure what this means, qualifying earnings are an employee’s salary, bonus or commission, overtime, and statutory sick pay/maternity pay.
As a rule of thumb, pension contributions will apply to anything earned between £6,032 and £46,350.
The value of pensions and the income they produce can fall as well as rise. You may get back less than you invested.
Do employees have to contribute?
Yes. The total minimum contribution level to any scheme is currently 5%, so if you pay the required 2%, employees must pay the remaining 3%. If you pay more than 2%, they’ll only have to make up the shortfall. You can both contribute more than the 5% between you if you want.
All auto-enrolment schemes must be tax registered and can be either defined benefit or defined contribution. They’ll also have to meet certain requirements before you can start making contributions on your employees’ behalf.
Things to bear in mind
- You must stick to at least the minimum contribution limits outlined above.
- Scheme providers will have a day of the month you must make employee contributions by.
- Employees can opt-out if they want to and opt-back in at any time.
- The current allowance rules when dealing with pensions apply. That means employees can invest 100% of their earnings (up to £40,000) in a year and must not invest more than £1.03m in total over their lifetime.
If you’d like to talk to us about auto-enrolment pensions, please use the pop-up form on the right of this page. If you prefer to use the phone, we’re here on 01244 470 107. Alternatively, you can send an email to: email@example.com
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