Once you have found out your client's staging date you will need to start devising a plan to implement an auto-enrolment pension scheme. This process will involve liaising with both your client and external advisors in order to successfully manage the transition. Please note you should not provide advice about pensions schemes themselves.
Assessing the Workforce
One of the first things that you or your client will need to do is assess the business's work force to find out who needs to be auto-enrolled. What you'll need to do depends on their ages and how much they earn. In the long term, check that any payroll software will alert you to any new or existing staff becoming eligible for automatic enrolment as they get older or their wages change.
What to assess
- Is the member of staff over 22 and under state pension age?
- Do they earn over £10,000 a year?
If the answer is yes, they will have to be automatically enrolled into a pension scheme that both the employer and the employee make contributions to. These employees are known as 'eligible jobholders'.
Staff earning £10,000 or less
Staff aged 16 to 74, earning over £5,772 up to and including £10,000 a year, have the right to 'opt in' to their employer's automatic enrolment pension scheme. This is a similar process to automatic enrolment, and your client will have to contribute to their pension.
Those aged 16 to 74 who earn £5,772 a year or less have the right to join a pension scheme of some kind. They can only join after your staging date.
For more information go to opting in and joining.
Staff aged under 22 earning above £10,000
If your client has staff aged 16 to 21 who earn more than £10,000, they have a right to opt in to the automatic enrolment pension scheme. Again, you will have to contribute to their pension if they decide to opt in.
The table shows the rights of staff depending on how old they are and what they earn in a year.
Annual earnings (2014-2015) | Age |
|
16-21 years old
| 22-state pension age | State pension age -74 |
£5,772 or below |
'Entitled Worker'
Has a right to join a pension scheme of some kind
|
Over £5,772 to £10,000 |
'Non-eligible jobholder'
Has a right to opt in to auto-enrolment scheme
|
Over £10,000 |
'Non-eligible jobholder'
Has a right to opt in |
'Eligible jobholder'
Must be automatically enrolled |
'Non-eligible jobholder'
Has a right to opt in |
For further information please consult the employer responsibilities section of the Pensions Regulator website
http://www.thepensionsregulator.gov.uk/employers/tools/employer-duties.aspx
When to assess
It's a good idea to assess the workforce of each of your clients straightaway, so they will be able to prepare for the costs involved in implementing a pension scheme. You’ll need to make sure staff data is correct, such as their full names, dates of birth, contact details and National Insurance numbers.
If your client does not have a pension scheme already, they’ll have to find one. Your services are limited in this respect because you are not qualified to offer pension scheme advice. You can direct your client to TPR's website here: setting up a pension scheme.
Bear in mind that your client, or you as their representative, will have to do a formal assessment on their staging date so you know exactly who you’ll have to automatically enrol. For more information go to On and after your staging date.
Reviewing the Software You Use
A crucial step in preparing for auto-enrolment is making sure that the payroll software your client uses is capable of implementing the scheme and working out who needs to be automatically enrolled.
Questions to ask software providers
When speaking to your existing software provider or selecting new software, you should ask whether the system:
- assesses the workforce
- allows the use of postponement
- calculates pension contributions
- handles opt-in and joining
- handles opt outs and refunds
- supports you in generating and issuing letters to your client's staff
- keeps records and provides reports
- works with some or all pension scheme provider systems
Information to put into the software
Having got the right software in place, you’ll need to know how to use it before you get to your staging date. This means understanding:
- what information you need to put in
- how to configure it
- what outputs the software will give and how
You’ll need to test the software ahead of your client's staging date to ensure you understand how it works, and to check that you know where to find all the information you’ll need.
Maintaining up-to-date records
For bookkeepers it no doubt goes without saying that it's crucial for your client to hold accurate information about their staff, their personal and address information and the contributions that have been made on their behalf.
Inaccurate records or missing data can have serious consequences, which can include staff being automatically enrolled at the wrong time, information about automatic enrolment not getting to the staff member, and the wrong amount being paid to their staff at retirement. It is their responsibility to ensure that records are correct and up-to-date.
Reviewing Existing Pension Arrangements
This is the key part of the process that cannot be performed by a bookkeeper. The business owner needs to find a qualifying auto-enrolment pension scheme that will fit their circumstances. It is strongly recommended that independent financial advice is sought due to the complexity of the pensions market.
You can direct your client to TPR's website here: setting up a pension scheme.
Finding out how much it will cost
It is likely that the first question your client asks you is how much will it cost? It is compulsory for your client to make an employer contribution to the pension of each auto-enrolled and opted-in employee based on a percentage of their earnings.
The minimum amount that an employer must contribute is being phased in, starting at 1% and rising to 3% of staff’s qualifying earnings- for more information visit TPR's website here contributions and funding.
Your client should bear in mind that there may be other costs involved depending on their pension provider and the scheme they choose.
TPR has an employer contribution calculator tool on its website where you can input detailed information about employee earnings such as maternity pay and bonuses, however it does not provide information about the minimum contribution required during the 'phasing-in' period. We recommend that you also refer your client to the contributions calculator available on the Money Service.
www.thepensionsregulator.gov.uk/employers/tools/employer-contributions.aspx
www.moneyadviceservice.org.uk/en/tools/workplace-pension-contribution-calculator
Raising Awareness amongst the Workforce
It is a great idea for your clients to engage with their workforce about auto-enrolment. As well as generally discussing the topic there is an obligation to write to each employee within one month of the business's staging date stating how the new scheme will affect them. Template letters can be generated using this tool on The Pensions Regulator website:
http://www.thepensionsregulator.gov.uk/employers/letter-templates-for-employers.aspx