Compulsory Employer Contributions – Pension Reform

All employers in the UK will soon have to comply with a number of pension ‘duties’.
Every UK employer has been allocated one of the 43 ‘Staging Dates’ that start in October 2012 and extend to September 2016.
Once an employer reaches his or her staging date the new duties apply.

The two main ones are as follows:

1/  The requirement to provide a qualifying pension scheme
and
2/  The requirement to put all eligible employees into it and pay towards their pensions.

The requirement to provide a qualifying pension scheme.
Every employer with at least one eligible employee will be required to make a Qualifying Workplace Pension Scheme (QWPS) available to their employees.
There are certain standards to meet if a pension scheme is to be given qualifying status.
If an employer doesn’t want to set up their own qualifying scheme there’s an off-the-shelf version been put together for them that’s called the National Employment Savings Trust (NEST).
So, to be compliant from the outset employers will need to ensure they have a QWPS ready for their eligible employees.

Employees eligible for automatic enrolment will be:
• those who aren’t already active members of a qualifying scheme;
• aged between 22 years and the State Pension age;
• earn over £7,475 gross a year;

The requirement to put all eligible employees into it and pay towards their pensions
Employers are required to identify which of their employees are eligible for auto-enrolment into their QWPS and to auto-enrol such employees on the day they become eligible.
They are also obliged to provide each employee with specific information about pensions, but must ensure they do not (accidentally or otherwise) give an employee ‘financial advice’ whilst doing so.
Although the employer is obliged to enrol all eligible employees into their QWPS no employee is required to stay in the scheme if they don’t want to; they have the right to opt-out.
Those who opt out within the ‘opt-out window’ can have their contributions returned.
(another employer duty ensures that contributions must be deducted while the opt-out process is in train), but those who opt out after the window is closed can’t get their money back and need to be given deferred benefits within the QWPS instead.
A requirement for firms to keep detailed records will be one of the main issues.

An example.
An employer with 150 employees, but only 100 in their QWPS.
A quick check of the PAYE record and the pension scheme would, alert anyone interested in what’s going on at this particular firm that some detailed records would need to be available. The 50 people on the payroll who are not in the pension scheme would need to be accounted for.
The employer would need to be able to demonstrate that employees either weren’t in the scheme because they were not eligible, or that they had been enrolled in the scheme and had opted-out.
One or the other. There’s no middle ground.

What would do the trick would be documentary evidence in the case of each employee who had opted-out showing when they were auto-enrolled, what documentation was given to them and when, how much they had contributed and how much they had been refunded and when, or that they had deferred entitlements in the scheme.

Some things an employer will need to do…….
Set up a qualifying scheme;
understand the different criteria defining qualifying schemes,
identify eligible workers and jobholders;
understand when to auto-enrol eligible jobholders;
auto-enrol eligible jobholders at the appropriate time;
change their payroll systems;
know when their staging dates are, and the leeway now applying to implementation;
understand the information requirements;
understand the timing of the information requirements;
understand the employer choices about when to automatically enrol;
register with the Pensions Regulator at the right time;
re-register with the Pensions Regulator at the right time;
inform eligible employees of their right to opt-out;
re-enrol those who do opt-out at the correct time;
refund the contributions to those who opt-out in the opt-out window;
keep records for at least six years of all actions and outcomes regarding those who remain members once auto-enrolled and those who opt-out, whether in the opt-out window or outside the opt-out window, and the refunds made to those opting-out in the opt-out window;
inform postponed eligible jobholders about the postponement within one month of the original automatic enrolment date;
inform eligible jobholders subject to transitional arrangements of the date that they will be enrolled into the scheme;
contribute at least a minimum amount (which will change through the phasing period) towards their employees’ pensions;

Staging Dates

Employer (by PAYE scheme size or other description)

120,000 or more- 1st October 2012

50,000-119,999 – 1st November 2012

30,000-49,999 – 1st January 2013

20,000-29,999 – 1st February 2013

10,000-19,999 – 1st March 2013

6,000-9,999 – 1st April 2013

4,100-5,999 – 1st May 2013

4,000-4,099 – 1st June 2013

3,000-3,999 – 1st July 2013

2,000-2,999 – 1st August 2013

1,250-1,999 – 1st September 2013

800-1,249 – 1st October 2013

500-799 – 1st November 2013

350-499 – 1st January 2014

250-349 – 1st February 2014

Less than 50 with the last 2 characters in their PAYE reference numbers – 1st March 2014
92, A1-A9, AA-AZ, B1-B9, BA-BY, M1-M9, MA-MZ, Z1-Z9 or ZA-ZZ

240-249 – 1st April 2014

150-239 – 1st May 2014

90-149 – 1st June 2014

50-89 – 1st July 2014

Less than 50 with the last 2 characters in their PAYE reference numbers – 1st August 2014
BZ

Less than 50 with the last 2 characters in their PAYE reference numbers – 1st September 2014
00-01

Less than 50 with the last 2 characters in their PAYE reference numbers – 1st October 2014
02-04

Less than 50 with the last 2 characters in their PAYE reference numbers – 1st November 2014
05-07, 0A-0Z, C1-C9, CA-CZ, D1-D9 or DA-DZ

Less than 50 with the last 2 characters in their PAYE reference numbers – 1st January 2015
08-11, 1A-1Z, E1-E9 or EA-EZ

Less than 50 with the last 2 characters in their PAYE reference numbers – 1st February 2015
12-15, 2A-2Z, F1-F9, FA-FZ, G1-G9 or GA-GZ

Less than 50 with the last 2 characters in their PAYE reference numbers – 1st March 2015
16-20, 3A-3Z, H1-H9 or HA-HZ

Less than 50 with the last 2 characters in their PAYE reference numbers – 1st April 2015
11-I9, IA-IZ

Less than 50 with the last 2 characters in their PAYE reference numbers – 1st May 2015
21-25, 4A-4Z, J1-J9 or JA-JZ

Less than 50 with the last 2 characters in their PAYE reference numbers – 1st June 2015
26-31, 5A-5Z, K1-K9 or KA-KZ

Less than 50 with the last 2 characters in their PAYE reference numbers – 1st July 2015
32-38, 6A-6Z, L1-L9 or LA-LZ

Less than 50 with the last 2 characters in their PAYE reference numbers – 1st August 2015
N1-N9 or NA-NZ

Less than 50 with the last 2 characters in their PAYE reference numbers – 1st September 2015
39-47, 7A-7Z, O1-O9, OA-OZ, P1-P9 or PA-PZ

Less than 50 with the last 2 characters in their PAYE reference numbers – 1st October 2015
48-57, 8A-8Z, Q1-Q9, QA-QZ, R1-R9, RA-RZ, S1-S9, SA-SZ, T1-T9 or TA-TZ

Less than 50 with the last 2 characters in their PAYE reference numbers – 1st November 2015
58-69, 9A-9Z, U1-U9, UA-UZ, V1-V9, VA-VZ, W1-W9, WA-WZ

Less than 50 with the last 2 characters in their PAYE reference numbers – 1st January 2016
70-83, X1-X9, XA-XZ, Y1-Y9 or YA-YZ

Less than 50 with the last 2 characters in their PAYE reference numbers – 1st February 2016
84-91 or 93-99

(a) Less than 50 unless otherwise described or (b) no PAYE scheme  – 1st February 2016

New employer (PAYE income first payable between 1st April 2012 and 31st March 2013) – 1st March 2016

New employer (PAYE income first payable between 1st April 2013 and 31st December 2013) – 1st May 2016

New employer (PAYE income first payable between 1st January 2014 and 30th September 2014) – 1st June 2016

New employer (PAYE income first payable between 1st October 2014 and 30th June 2015) – 1st August 2016

New employer (PAYE income first payable between 1st July 2015 and 31st March 2016 – 1st September 2016

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