The Workplace Pension Reform, also known as auto-enrolment started it’s ‘phasing in’ from April 2012. Larger corporations will already be in full swing but now it is the turn for smaller businesses, which will include most dental and medical practices.
Do you know your responsibilities as an employer? Are you eligible as an employee? Or maybe you are just setting up a business – if so, different rules apply.
What EMPLOYERS need to know and do
WHAT DATE DOES YOUR PENSION SCHEME START?
Most dental and medical practice have between 1 and 49 employees. The auto-enrolment process, for this size business, started from June 2015, phasing in all employers by April 2017.
The exact date, which is called the “staging date”, is dependent on the PAYE Reference and can be looked up online, although all employers should have been notified already by the Pensions Regulator.
There is an optional window for deferment of three months from your staging date but should you choose this route, employees need to be notified.
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WHO IS ELIGIBLE?
These factors determine if your employee is eligible for auto-enrolment:
- Age between 22 and the State Pension Age
- Work in the UK
- Earn more than £10,000 per year (15/16), less if the time period is shorter than 1 year, see table below
Period | 6 months | 3 months | 1 month | 4 weeks | 2 weeks | 1 week |
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Amount | £4,998 | £2,499 | £833 | £768 | £384 | £192 |
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WHAT ARE YOUR RESPONSIBILITIES?
As an employer, it is down to you to ensure that all eligible employees are registered onto a suitable pension scheme by the necessary date, also notifying your employees of the action taken.
The auto-enrolment date is the latest of the following:
- your staging date
- the date an employee becomes eligible for auto-enrolment – for example turning 22 years of age or passing the earnings threshold
- the end of any waiting period – which can be up to 3 months
There is a 6 week window for enrolment, however, the membership scheme must be backdated to the auto-enrolment date.
Contributing to the pension from the start date is also a responsibility of you as an employer.
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HOW MUCH IS THE CONTRIBUTION?
Currently there is a minimum contribution of 2%, relating to annual salaries of over £5,824 and up to £42,385 (15/16). This is the % between the employer, the employee and the government tax relief. For less than annual this is reduced, see table below:
Months | 6 months | 3 months | 1 month | 4 weeks | 2 weeks | 1 week |
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From | £2,912 | £1,456 | £486 | £448 | £224 | £112 |
To | £21,193 | £10,597 | £3,532 | £3,261 | £1,631 | £815 |
From October 2017 the minimum contribution increases to 5% and from October 2018 it increases again to 8%.
Employers may offer their employees higher than the minimum contribution as a work-based incentive.
What EMPLOYEES need to know and do
WHAT ARE YOUR RESPONSIBILITIES?
As the name suggests, “auto-enrolment” needs to be automatic, with no responsibility left to the employee. On the other hand, you don’t have the option to apply to join, or “opt-in”, choose your contribution level or decide how your contributions are invested – this is part of the employer responsibility in choosing a pension scheme.
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CAN EMPLOYEES OPT OUT?
Yes, employees can opt out within the first month of enrolment and it will be treated as if they never joined.
There will be a periodic re-auto-enrolment though.
What NEW EMPLOYERS need to know and do
DATE FOR STARTING REGISTRATION
For new businesses the rules vary slightly. This table presents the staging dates for new employers:
PAYE first payable between... | Staging date |
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1 April 2014 and 31 March 2015 | 1 August 2017 |
1 April 2015 and 31 December 2015 | 1 October 2017 |
1 January 2016 and 30 September 2016 | 1 November 2017 |
1 October 2016 and 30 June 2017 | 1 January 2018 |
1 July 2017 and 30 September 2017 | 1 February 2018 |
Seek advice on this complex area
There are lots of other Terms & Conditions that apply with auto-enrolment, so it is best to seek advice or research further to ensure everything has been understood and put in place.
Unusual circumstances including maternity, sick leave, part-time, contract and short-term or temporary workers need different attention.
Also, any employees with enhanced or fixed protection have different treatment following a change in legislation from 1 April 2015.
Dental & Medical Financial Services can help answer questions regarding the workplace pension reform so you feel reassured that you have everything in order for your employees.
Tel: 01403 780 770