Workplace pensions – what you need to know
Posted on 11th December 2023
As an employer you are responsible for enrolling eligible employees on a workplace pension scheme. What’s more, you have ongoing responsibilities after enrolment.
Even if you don’t have to enrol your employees they can still ask to join your scheme. However, you won’t have to make employer contributions if their earnings are low. This is when they earn the following amounts or less:
£520 a month
£480 over four weeks
£120 a week.
Your workplace pension responsibilities
You must monitor the ages and earnings of your employees every time you pay them. You must check to see if they need to be auto enrolled in your pension scheme. You must also confirm at least minimum contributions are being made. Total contributions should be 8% of salary: as an employer you must pay at least 3% and your employee 5%.
You must also manage requests to join or leave your pension scheme and keep accurate records to show you’ve met your legal obligations.
Every three years you must check whether anyone who has reduced their contributions or opted out should be re-enrolled. You’ll also have to submit a re-declaration of compliance.
Employee pensions – things to consider
Employee earnings and ages. You must enrol eligible employees in your pension scheme and write to them within six weeks from the day they meet the age and earnings requirements. This applies to employees between 22 and state pension age earning over £10,000 annually, £833 monthly or £192 weekly. If they qualify you must enrol them into your pension scheme and you must both contribute.
Pension contributions. You must make contributions to the scheme every time you run payroll. These payments are monitored so the regulators can tell if payments aren’t made. If you don’t make the right contributions you might have to make backdated payments.
Employees who join or leave your scheme. Employees aged 16 to 74 who ask in writing to join your scheme must be added within a month. If they earn more than £520 per month or £120 a week you will have to make employer contributions. Your pension scheme provider can tell you how much the contributions should be.
Employees can choose to leave your pension scheme. If they ask to leave within one month of entering it’s called ‘opting out’. In most cases your pension provider will manage the process for you. You must stop deducting contributions from their pay and arrange a full refund of what has been paid so far. You must do this within one month of receiving their request. You can direct employees considering leaving your pension scheme to MoneyHelper advice about what it will mean.
Cost of living. Understandably employees might worry about paying their bills as the cost of living increases. They might want to opt out of your pension scheme or access some of their pension funds. However, they should understand that stopping or reducing their pension contributions could affect their standard of living when they retire.
Supporting employees
You can encourage your employees to ask for advice before they decide to leave your pension scheme. If they are thinking of transferring money from their pension you can also suggest they check the FCA’s ScamSmart advice. This highlights the warning signs of a scam and helps verify who they are dealing with.
Your employee pension records
To show you’re meeting your legal duties you must keep accurate records. These should include:
names and addresses of people in the pension scheme
when money is paid into the scheme
your scheme’s reference or registry number.
You must keep these records for six years and details of requests to leave the pension scheme for four years.
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