Do you provide a staff workplace pension?

Understand the complexities of auto enrolment

Auto enrolment is a Government initiative that enables employees to pay into a workplace pension scheme with the additional benefit of employer and Government contributions.

Every employee over the age of 22 years old, who earns more than £10,000 each year, must be enrolled into a workplace pension scheme by their employer. Even though enrolment is compulsory, the employee has the option to opt out of the scheme should they choose to.

As an employer, it’s your responsibility to auto enrol staff into a workplace pension and follow compliance.

Business review auto-enrolment pension
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How does auto enrolment work?

Once enrolled in a workplace pension scheme, an employee has around 5% of their qualifying earnings automatically taken from their salary and paid into the pension every month. They can also top up their fund to a maximum amount every financial year.

A workplace pension belongs to an employee even if you, as the employer, auto enrolled them. If they leave to work elsewhere, they will take the pension pot with them although all contributions through your payroll will cease. The employee can restart their pension contributions through a new employer or transfer the pension to a new scheme.

Becky advised us on setting up our corporate pension schemes and life insurances. She expertly guided us through auto-enrolment and continues to advise on updates to the schemes and things to look out for.

Kimberley Walley, AEON Engineering Ltd
Female business owner reviewing auto-enrolment pensions

Do you know your auto enrolment responsibilities as an employer?

As an employer, you are legally required to contribute a minimum of 3% of each employee’s qualifying earnings into their pension pot. The qualifying earnings are based around the income tax bands of 20%, 40% or 45%.

Both employee and employer contributions are paid before any taxes are deducted from the total salary. This tax relief is basically a refund on what has been paid into the pension scheme.

Every three years an employee who chose to opt out of a workplace pension must be re-enrolled back into the scheme if they still meet the eligibility criteria.

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When can the pension be accessed?

The money paid into a pension will be held by the pension provider until the employee reaches at least 55 years of age.

There may be other ways to access a pension or to transfer the pot into a different type of fund. A professional financial advisor will guide employers and employees on the choices available.

Talk to Willow Financial Solutions about the complexities of auto enrolment and workplace pensions.

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