Pensions Auto-Enrolment

From adverts in the newspapers to TV commercials with some of the UK’s top business leaders saying “I’m in”, it’s clear that workplace pensions are changing.  That change is called Automatic Enrolment (AE) and since October 2012 has been rolled out across the UK’s largest employers.  With effect from 1 April 2015 all employers with at least 50 employees “are all in” (to quote the adverts).

AE is the compulsory obligation for employers to enrol eligible workers into a qualifying workplace pension scheme if they are not already in one.  An eligible employee is one aged between 22 and state pension age, working in the UK and/or on a UK employment contract and earning more than £10,600 per year.

So as to remind the smallest employers of their obligations, The Pensions Regulator (TPR), who are the ultimate arbiters of AE, has written to all employers with fewer than 30 employees informing them when they will be brought into the new AE system. While the exact date will depend on the employer’s circumstances, generally employers with fewer than 30 employees will stage between January 2016 and April 2017 depending on the exact number of employees and when their PAYE scheme was registered.

Complying with the staging date and associated obligations is crucial as there is a fixed penalty of £400 for non-compliance, and after that, daily penalties based on the number of employees (up to £500 per day for employers with fewer than 50 employees).  Penalties for non-compliance have already been issued by TPR to some employers who have already staged.

Actions Employers Should Take

Employers are advised to consult with their financial advisers and pension providers to ensure their pension scheme qualifies.  Employers should also check that their HR and payroll systems can handle the changes, including employee opt outs and compulsory employee and employer pension contributions for those not opting out.

For reference the current minimum contribution rates are 1% each for employer and employee, rising to 3% and 5% respectively by October 2018.  Please note the 5% employee contribution is made of 4% contribution and 1% tax relief (representing 20% on the contribution paid).  Employers paying in excess of their minimum level can reduce the employee burden accordingly but employers cannot pass their minimum contribution levels onto their employees.

How We Can Help

We can assist with the initial workforce assessment and will work with your financial advisers to design an employee contribution system that is suitable for your workforce.

We also provide payroll services for a range of clients and our payroll software is fully compliant with this new legislation. We are able to perform all the payroll tasks required including:

We can also discuss tax efficient opportunities for mitigating the additional employer cost of compliance.  For further information on our AE or payroll services, please contact us.

US Treasury Department Circular 230 disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.  

This article has been written for the general interest of our clients and to stimulate further thought and enquiry.  It does not contain answers to specific situations and it is therefore essential to treat it as a prompt to take specific advice on any real and particular issues. We believe that the facts as summarised in this article are correct as at the time of going to press.  If we discover that the article might be read in a way that conveys a misleading impression (whether by tone, content, error or omission) we will make the necessary changes and draw attention to  what has been changed  once we become aware of the need to do so.  We will not be responsible for any action taken by a reader who relies on the article but does not seek further advice to answer any specific query.


This article has been written for the general interest of our clients and contacts to stimulate further thought and enquiry. It does not contain answers to specific situations and it is therefore essential to treat it as a prompt to take specific advice on any real and particular issues. We believe that the facts as summarised in this article are correct as at the time of going to press in March 2015. If we discover that the article might be read in a way that conveys a misleading impression (whether by tone, content, error or omission) we will make the necessary changes and draw attention to what has been changed once we become aware of the need to do so. We will not be responsible for any action taken by a reader who relies on the article but does not seek further advice to answer any specific query.

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