Auto Enrolment
Workplace Pensions
‘Auto Enrolment’ is the Government method to get employees into a workplace pension scheme. It is overseen by the Pensions Regulator (TPR). Auto enrolment is a complicated process with confusing jargon and can be of little financial benefit for some workers. We have tried to simplify the process with our simple standard pension scheme. We will be happy to support you with your workplace pension. This is just one part of our comprehensive Business Companion Service.
If you become a client we will help you with all the required steps. We will:
1) Become your main contact with TPR.
2) Confirm whether your business is an employer with workplace pension duties (Directors may be exempt).
3) Set up our Simple Standard Pension Scheme for you, normally with the Peoples Pension or Penfold, or help you manage your existing Pension scheme.
4) Assess your staff each month for enrolment and contributions as part of payroll service. See Detailed Guidance from the Pensions Regulator (pdf)
5) Arrange file uploads into your pension scheme for you every month. Your company pension contributions will be taken from your bank account by Direct Debit the following month.
6) Draft letters & guidance for you to give to new employees about your pension scheme.
7) Advise you when contribution rates or thresholds change.
8) Take you through the re-enrolment process every three years.
9) Complete your Declaration of Compliance and Re-declarations of Compliance with TPR.
Our Simple Standard Pension Scheme – Recommendations
Employer-Only Contributions and Rates
We recommend that the employer pays all the pension contributions, and the employee does not pay any. Here are our reasons:
Fewer complaints from staff and follow ups from the Pensions Regulator (TPR)
TPR offers a complaints service for employees who are unhappy about the administration of their workplace pension schemes. We think they will concentrate their enforcement action and non compliance fines where employees are disgruntled. By making our standard pension scheme non contributory there will be no reduction in employees’ net pay (at a time when few can afford it). The staff will have no reason to complain about any consultation or bureaucratic failures if the employer is picking up all the costs anyway.
Unfair tax relief on Employee Contributions
When making employee contributions you can choose to have contributions taken before tax or after tax (with 20% tax relief then applied). The first option results in the lowest paid staff missing out on the tax relief. The second option means that higher rate tax payers will not necessarily get all the tax back on their contributions.
Employer Pension Contributions do not suffer NI
Employee pension contributions suffer Employer NI and (depending on the tax treatment) Employee NI. It is actually more efficient tax-wise for employees to forgo a pay increase and receive the full 8% of pension contributions from their employer. There is no Employer or employee NI wasted on employer-only pension contributions.
This recommendation is for Eligible and Non-Eligible workers only. As ‘Entitled’ workers are earning below the threshold for qualifying earnings (£520 per month) then no contributions will be calculated for them. See the Pensions Regulator Website for Assessment of Staff for Eligibility
TPR has set minimum contribution rates as 8% of ‘banded qualifying earnings’ – of this at least 3% must be paid by the employer. We usually recommend that the Employer pays this full 8% with no employee contributions.
Note: These contribution rates are calculated as a percentage of ‘Banded Qualifying Earnings’ only – this is the band of earnings between £520 and £4,189 per month (£6,240 and £50,270 per year).
The Peoples Pension
We mainly use The Peoples Pension (PP). If possible we only want to use this provider for our clients with payroll. Our processes can be much simpler and more efficient if we only need to work with one pension provider.
The reasons for choosing the Peoples Pension include:
1. Lower charges for your staff. PP depends on a 0.5% Annual Management Charge applied to the funds of each pensioned staff. This is not the lowest. But there are no other charges. Therefore it is likely to be the cheapest in the medium term.
2. There is no charge for withdrawing your funds to a cheaper fund, or to an alternative pension provider. This means that the PP will have to remain competitive, lest employers move to a cheaper or better provider.
3. There is only a very small fee for account management per month (unlike Now Pensions).
4. There is no deduction from the initial contribution (unlike NEST).
5. The employer pays no fees for middleware administrative systems that we expect that smaller employers will neither need nor want.
6. The website is fairly friendly. The employer is given a portal with a log in and password, and the employees can get a login which will allow them to see their pension details.
7. The staff answer the phone (unlike our experience with others like Scottish Widows).
8. Emails often get a reply.
9. The funds are not held by a branch of the state (unlike NEST).
10. The scheme allows ‘Net Pay’ Tax Relief which should save some of the tax wasted on Employee contributions (like Now Pensions, but unlike NEST pensions).
Our recommendation is not a ringing endorsement, but in the absence of any better criteria this will be the main Pension Scheme provider for our standard scheme. The Peoples Pension charge £300+VAT to set up a new scheme through us.
Why choose the People Pension
Penfold
The reasons for choosing the Penfold include:
1. Lower charges for your staff. PP depends on a 0.5% Annual Management Charge applied to the funds of each pensioned staff. This is not the lowest. But there are no other charges. Therefore it is likely to be the cheapest in the medium term.
2. There is no charge for withdrawing your funds to a cheaper fund, or to an alternative pension provider. This means that the PP will have to remain competitive, lest employers move to a cheaper or better provider.
3. There is only a very small fee for account management per month (unlike Now Pensions).
4. There is no deduction from the initial contribution (unlike NEST).
5. The employer pays no fees for middleware administrative systems that we expect that smaller employers will neither need nor want.
6. The website is fairly friendly. The employer is given a portal with a log in and password, and the employees can get a login which will allow them to see their pension details.
7. The staff answer the phone (unlike our experience with others like Scottish Widows).
8. Emails often get a reply.
9. The funds are not held by a branch of the state (unlike NEST).
10. The scheme allows ‘Net Pay’ Tax Relief which should save some of the tax wasted on Employee contributions (like Now Pensions, but unlike NEST pensions).
Our recommendation is not a ringing endorsement, but in the absence of any better criteria this will be the main Pension Scheme provider for our standard scheme. The Peoples Pension charge £300+VAT to set up a new scheme through us.
Workplace Pensions
‘Auto Enrolment’ is the Government method to get employees into a workplace pension scheme. It is overseen by the Pensions Regulator (TPR). Auto enrolment is a complicated process with confusing jargon and can be of little financial benefit for some workers. We have tried to simplify the process with our simple standard pension scheme. We will be happy to support you with your workplace pension. This is just one part of our comprehensive Business Companion Service.
If you become a client we will help you with all the required steps. We will:
1) Become your main contact with TPR.
2) Confirm whether your business is an employer with workplace pension duties (Directors may be exempt).
3) Set up our Simple Standard Pension Scheme for you, normally with the Peoples Pension or Penfold, or help you manage your existing Pension scheme.
4) Assess your staff each month for enrolment and contributions as part of payroll service. See Detailed Guidance from the Pensions Regulator (pdf)
5) Arrange file uploads into your pension scheme for you every month. Your company pension contributions will be taken from your bank account by Direct Debit the following month.
6) Draft letters & guidance for you to give to new employees about your pension scheme.
7) Advise you when contribution rates or thresholds change.
8) Take you through the re-enrolment process every three years.
9) Complete your Declaration of Compliance and Re-declarations of Compliance with TPR.
Our Simple Standard Pension Scheme – Recommendations
Employer-Only Contributions and Rates
We recommend that the employer pays all the pension contributions, and the employee does not pay any. Here are our reasons:
Fewer complaints from staff and follow ups from the Pensions Regulator (TPR)
TPR offers a complaints service for employees who are unhappy about the administration of their workplace pension schemes. We think they will concentrate their enforcement action and non compliance fines where employees are disgruntled. By making our standard pension scheme non contributory there will be no reduction in employees’ net pay (at a time when few can afford it). The staff will have no reason to complain about any consultation or bureaucratic failures if the employer is picking up all the costs anyway.
Unfair tax relief on Employee Contributions
When making employee contributions you can choose to have contributions taken before tax or after tax (with 20% tax relief then applied). The first option results in the lowest paid staff missing out on the tax relief. The second option means that higher rate tax payers will not necessarily get all the tax back on their contributions.
Employer Pension Contributions do not suffer NI
Employee pension contributions suffer Employer NI and (depending on the tax treatment) Employee NI. It is actually more efficient tax-wise for employees to forgo a pay increase and receive the full 8% of pension contributions from their employer. There is no Employer or employee NI wasted on employer-only pension contributions.
This recommendation is for Eligible and Non-Eligible workers only. As ‘Entitled’ workers are earning below the threshold for qualifying earnings (£520 per month) then no contributions will be calculated for them. See the Pensions Regulator Website for Assessment of Staff for Eligibility
TPR has set minimum contribution rates as 8% of ‘banded qualifying earnings’ – of this at least 3% must be paid by the employer. We usually recommend that the Employer pays this full 8% with no employee contributions.
Note: These contribution rates are calculated as a percentage of ‘Banded Qualifying Earnings’ only – this is the band of earnings between £520 and £4,189 per month (£6,240 and £50,270 per year).
The Peoples Pension
We mainly use The Peoples Pension (PP). If possible we only want to use this provider for our clients with payroll. Our processes can be much simpler and more efficient if we only need to work with one pension provider.
The reasons for choosing the Peoples Pension include:
1. Lower charges for your staff. PP depends on a 0.5% Annual Management Charge applied to the funds of each pensioned staff. This is not the lowest. But there are no other charges. Therefore it is likely to be the cheapest in the medium term.
2. There is no charge for withdrawing your funds to a cheaper fund, or to an alternative pension provider. This means that the PP will have to remain competitive, lest employers move to a cheaper or better provider.
3. There is only a very small fee for account management per month (unlike Now Pensions).
4. There is no deduction from the initial contribution (unlike NEST).
5. The employer pays no fees for middleware administrative systems that we expect that smaller employers will neither need nor want.
6. The website is fairly friendly. The employer is given a portal with a log in and password, and the employees can get a login which will allow them to see their pension details.
7. The staff answer the phone (unlike our experience with others like Scottish Widows).
8. Emails often get a reply.
9. The funds are not held by a branch of the state (unlike NEST).
10. The scheme allows ‘Net Pay’ Tax Relief which should save some of the tax wasted on Employee contributions (like Now Pensions, but unlike NEST pensions).
Our recommendation is not a ringing endorsement, but in the absence of any better criteria this will be the main Pension Scheme provider for our standard scheme. The Peoples Pension charge £300+VAT to set up a new scheme through us.
Additional Contributions
Additional employee contributions waste national insurance, so we generally advise against them. Ours is a simple scheme, and we cannot administer additional voluntary contributions from employees as part of our Payroll Service. However, if a member of staff wishes to make a one off payment towards their pension scheme, they can simply call the Peoples Partnership Member Services directly on 0300-2000-555 to arrange it.
It is also possible for employers to make additional contributions. These can be made on a regular basis or on an occasional basis as a staff incentive. Please contact Simple Accounting Ltd to organise this through the payroll.
Pensions Letters & Guidance for new staff
We will prepare informative letters and guidance for you to give to new staff. These are specific to your business and much more detailed than the template examples available from TPR. Our letters are worded so they can be given to new staff as part of their induction process – rather than having to wait to see if they are enrolled into the scheme during their first payroll. You may choose to include a postponement date for assessment (up to three months after their start date) in the letter.
Re-enrolment
Around three years after your initial staging date you will have to complete the re-enrolment process.
Here are the steps
a) Choose your re-enrolment date – this can be done anytime within a six-month window, which starts three months before the third anniversary of your staging date. In general we will just stick to the third anniversary.
b) Reassess any Pension Scheme members who have opted out and re-enrol them if they earn above the £833 (the auto enrolment threshold) in the re-enrolment month. Luckily with our employer-only contribution scheme few employees have felt the need to opt out.
c) Write to any employees who have been re-enrolled – and give them the option of opting out again.
d) We will complete the re-declaration of compliance on your behalf with the Pensions Regulator.
Our Fees
At the moment we are not charging an extra ongoing fee for managing your workplace pension despite the significant work involved. This may change in the future.
