Administrative Responsibilities– An employer must automatically enrol certain members of their workforce into a pension scheme and make a contribution towards the members’ pensions. The main things an employer must do are: a) provide a qualifying scheme for workers, b) automatically enrol all eligible jobholders onto the scheme, c) pay employer contribution for eligible jobholders to the scheme, d) tell all eligible jobholders that they have been automatically enrolled and they have the right to opt out if they want to do so and e) register with The Pensions Regulator. There are also certain activities an employer must not do e.g. encouraging a worker not to auto-enrol.
Assessment Date - this is the date that the workforce is assessed in each pay reference period. The first assessment date is likely to be either the staging date or staging date plus postponement period.
Automatic Enrolment - When an employer places eligible jobholders into an automatic enrolment scheme 'automatically', ie without the jobholder's involvement. An individual who is automatically enrolled is free to opt out and can stop saving at any time, but needs to take action to do so.
Automatic Enrolment Scheme - a qualifying scheme that meets additional criteria to be an automatic enrolment scheme. Eligible jobholders who are not already a member of a qualifying scheme on the employer's staging date must be automatically enrolled into an automatic enrolment scheme. The employer will choose the scheme for automatic enrolment.
Contribution Costs - an employer is required to contribute to the costs of the pensions of their workforce.
Earnings trigger for automatic enrolment- the amount of qualifying earnings a worker must earn before the duty for their employer to automatically enrol the worker is triggered. For the 2014-2015 tax year, this is set at £10,000. This figure will be reviewed annually by the Government.
Financial Penalties - The Pensions Regulator will have the power to issue a fixed penalty of £400 to an employer, as well as escalating penalty at a daily rate. Escalating (daily) penalties are set at a level to fine an employer the cash flow benefit they are getting by not complying. Therefore, there would be no incentive for an employer simply to pay a fine and not comply. Instead the opposite is true; there is no financial benefit in not complying.
Lower and upper levels of qualifying earnings - a worker's earnings below the lower level and above the upper level are not taken into account when working out pension contributions. For the 2014-2015 tax year, the lower level is set at £5,772 and the upper level is set at £41,865. These figures will be reviewed annually by the Government.Worker – an employee or person who has a contract to provide work or services personally and is not undertaking the work as part of their own business.
Pay Reference Period - this is the earnings period against which auto-enrolment is assessed, and generally fits with the payroll frequency e.g. An employer paying their staff monthly will have a monthly Pay Reference period.
Pensions Committee – Many employers set up a pensions committee to oversee auto-enrolment and ensure that the employer continues to meet its statutory obligations.
Phasing - for DC schemes, the gradual phasing-in of contribution levels until they reach the minimum level required by law.
Postponement - Postponement is an additional flexibility for an employer that allows them to choose to postpone automatic enrolment for a period of their choice of up to three months. To exercise that choice, the employer must issue the worker or workers with a postponement notice.
Qualifying earnings - this includes all of the following pay elements (gross):
These earnings are used to identify whether an individual is an eligible jobholder or a non-eligible jobholder, and also to determine the level of contributions a scheme must require.
Qualifying scheme - a pension scheme that meets certain minimum standards set by legislation. There are different standards depending on the type of scheme.
Registration - a duty on employers to tell the regulator information about the pension scheme they are using and how many people they have enrolled into it. This should be done at Staging date.
Self-certification – Where the pension scheme’s definition of pensionable salary differs from the Pensions Regulator the employer may self-certify that the pensions contributions are sufficient.
Staging - the staggered introduction of the new employer duties, from 2012, starting with the largest employers. New PAYE schemes will be staged last.
Staging Date - the date when the new law is 'switched on' for a business.
The Pensions Regulator - The Pensions Regulator is the UK regulator of work-based pension schemes.