Auto-enrolment unravelled

If you are an arts sector employer, you will soon be required to automatically enrol ‘eligible jobholders’ into a qualifying pension scheme. Auto-enrolment starts now for very large employers, but all employers will have a specific staging date, which is based on their PAYE scheme size.

If eligible jobholders do not want to participate they can opt out but only afterwards

As well as automatically enrolling workers, the other big change is that employers will need to make contributions to these pension schemes. This will be a minimum of 3% but is being phased in, so the minimum contribution rate will be 1% up to September 2017, then increase to 2% until September 2018 before reaching the 3% rate from October 2018. Employees need to make contributions of 4%, also being phased in.

You can use a three-month waiting period so new staff or those on very short contracts do not have to be enrolled straightaway. Continuous service is what counts, so using consecutive short contracts will make no difference if a worker has been with you continuously for three months or more.

Auto-enrolment is compulsory. If eligible jobholders do not want to participate they can opt out but only afterwards − they cannot do so beforehand. Employers are not allowed to put any additional requirements on auto-enrolment or require personal information from jobholders.

So what do you need to do now? The first thing is to find out your staging date. In the table are the main staging dates, but there are a lot of different dates for smaller employers based on their PAYE reference number. You can check your exact date on the Pensions Regulator’s website.

PAYE scheme size	Staging date
Over 500	Before November 2013
Over 250	Before February 2014
Over 90	Before 1 May 2014
Over 60 Before	1 October 2014
Over 50	Before 1 April 2015
Fewer than 50	Between 1 June 2015 and 1 April 2017 depending on PAYE reference number*
New employers	Between 1 May 2017 and 1 February 2018 depending on date PAYE income was first payable*

*For exact date see guidance issued by the Pensions Regulator

You then need to organise an appropriate qualifying scheme. A ‘qualifying scheme’ has to meet certain criteria. It could be an established occupational or personal pension scheme, a new scheme set up to meet auto-enrolment requirements, or a central scheme (the National Employment Savings Trust or ‘Nest’) set up by the Government for those who wish to use it.

Employers with a scheme already in place will need to decide whether they want to use it and find out whether it meets the requirements. Employers with five or more employees should already have a stakeholder scheme available, but this will not be enough. I would recommend employers seek advice from a qualified independent financial adviser on what scheme is most suitable for their requirements.

You then need to check your workforce to find out who you need to automatically enrol. An eligible jobholder is a worker aged between 22 and the state pension age, who ordinarily works in the UK and earns above a set amount, currently set at £8,105. A worker can include casual staff, those on zero hours or similar, not just a conventional employee with a contract of employment. Older and younger staff earning the right amount can opt in, but do not have to be enrolled automatically.

You will need to tell your staff about auto-enrolment, and their right to opt in or out as appropriate. If you use a personal pension scheme, you also need to make sure the provider sends the terms and conditions to each eligible jobholder.

Because auto-enrolment involves contributions, budgetary planning will need to incorporate that as a payroll cost. In addition to contributions, there might also be management or administration fees, and other implementation costs.

More guidance on pensions auto-enrolment, exact staging dates and answers to other questions can be found on the Pensions Regulator website.