Pension Auto Enrolment


Soon all employers with 30 or fewer employees will be required to have a workplace pension scheme. The only exception to this is for companies with one director and one employee, who do not have to offer auto-enrolment.

Over the course of the next year, each company will get a staging date from when they need to enrol all eligible staff to their pension scheme.

Who Is Eligible?

Although employers have to assess all their staff for eligibility they may not have to automatically enrol all of them.

Has a right to join a pension scheme

If they ask, the employer must provide a pension scheme for them, but they don’t have to pay contributions.

Has a right to opt in

If they ask to be put into a pension scheme, the employer must put them in their automatic enrolment pension scheme and pay regular contributions.

Automatically enrol

The employer must put these members of staff in their automatic enrolment pension scheme and pay regular contributions. The employer doesn’t need to ask their permission. If they give notice, or the employer gives them notice, to leave employment before they have completed this process, they have a choice whether to automatically enrol them or not.

Choosing A Pension Scheme

If an employer already has an existing pension scheme then they should check with their pension provider whether they can use it for automatic enrolment. Otherwise if they need to set up a scheme they should start looking at pension providers now to find one that can meet your needs.

Ongoing Responsibilities

There are minimum contributions an employer must pay in order to comply with their duties which are a percentage of earnings and are shown below.

Date Employer minimum contribution Total minimum contribution
Before 30/09/17 1% 2% (including 1% staff contribution)
01/10/17 — 30/09/18 2% 5% (including 3% staff contribution)
01/10/18 onwards 3% 8% (including 5% staff contribution)

Tax Issues for Contributions

Auto-enrolment contributions are treated no differently to other types of pension scheme. Most schemes will be a money purchase arrangement so that contributions paid as a director or employee will qualify for basic tax relief at source (for instance if they contribute £80 HMRC will add another £20 making a total of £100). If they are a higher rate tax payer, they will need to claim additional tax relief through their tax return or by adjusting their tax code.

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