The Pensions Regulator (TPR) recently revealed that over eight million employees have now been enrolled into a workplace pension scheme.
However, with further changes in the pipeline, employers should ensure that they are up-to-date with the latest developments.
Auto-enrolment duties for new employers
Under pensions auto-enrolment, employers have a duty to enrol eligible employees into a workplace pension and pay a minimum contribution into the fund. Eligible employees are those aged between 22 and the state pension age, and who have qualifying earnings over the auto-enrolment earnings trigger of £10,000.
The law came into force for large employers on 1 October 2012 and has been rolled out gradually with staggered ‘staging dates’. This process is now reaching conclusion and, from 1 October 2017, all new employers must immediately comply with their auto-enrolment duties by enrolling any eligible employees into a workplace pension scheme, from the first day a member of staff begins employment.
Minimum contribution rates set to rise
The minimum contribution rates (currently 1% for both employees and employers) are set to rise from 6 April 2018 to 2% for employers and 3% for employees. A year later the minimum rates will reach their planned ongoing level, at 5% for employees and 3% for employers, giving a combined minimum pension contribution equivalent to 8% of qualifying earnings.
Contributions are generally payable on qualifying earnings between the lower threshold of £5,876 and the higher threshold of £45,000 in 2017/18.
Auto-enrolment enforcement steps up
As the more recent staging dates have brought the largest numbers of employers under auto-enrolment legislation, TPR has stepped up spot checks across the UK to ensure compliance. The latest published figures have shown that TPR issued 33,716 compliance notices in 2016/17, alongside 12,181 fixed penalty notices and 2,527 escalating penalty notices.
Employers who fail to comply with their auto-enrolment duties will be subject to significant penalties. Fines range from a £400 fixed penalty to a varying daily escalating penalty of between £50 and £10,000, depending on the number of employees.
We can help you to stay compliant with your auto-enrolment duties – please contact us for more information.