Auto Enrolment

Work place pensions

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Pension scheme requirements

Employers who have an existing pension scheme

Employers who have an existing pension scheme set up for their employees will need to ensure that it meets the auto enrolment requirements as set by legislation. This could result in the existing pension scheme meeting all requirements, the necessity to start another suitable pension scheme or the employer opting to use NEST.

A pension scheme that meets all the auto enrolment requirments will meet all the following criteria.

Automatic Enrolment criteria

• Must meet the following qualifying criteria,-
  • Needs to be an occupational pension scheme or a grouped personal pension scheme.
  • Needs to be tax registered with the inland revenue.
  • Needs to meet minimum criteria which will depend on the type of pension scheme
• Must not prevent, in any way shape or form, any employer from auto-enroling, opting in or re-enrolling employees
• Must not present the employee with the need to make a choice or provide information to remain an active member of the pension scheme.

Minimum Criteria

Minimum criteria has been set depending on the scheme type. Therefore,-

Group personal pension/Group stakeholder schemes

An agreement must exist between the employer and pension scheme provider that states,

• The employer must make pension scheme contributions on behalf of the employee
• The employer contibutions must be at least 3% of the employees qualifing earnings
• In the event the employer does not pay the full required 8% of employee qualifing earnings as pension contribution there must be an agreement in place between the employee and pension scheme provider where the employee agrees to pay the difference between what the employer contributes and the required 8% of their qualifying earnings.
• There must be a direct pay arrangment between the employer and employee

Occupational money purchase scheme

• The employer must make pension contributions on behalf of the employee
• Within the stipulated pay reference period the total minimum pension contribution cannot be less that 8% of the employees qualifing earnings.
• Of the total required minimum pension contribution the employer must pay at least 3% of the employees qualifing earnings.

Occupational defined benefit scheme

• Any defined benefit scheme that is contracted out will meet the minimum criteria as set out by legislation
• A pension scheme which is not contracted out (or ceases to be) will need to provide retirment benefits which are broadly equivalent to or better than a test scheme standard. This will be determined ordinarily by the pension scheme actuary.

Self certification

Existing pension schemes are more than likely to have different criteria to auto enrolment when considering qualifying earnings (or pensionable pay). The employer can self certify the pension scheme to demonstrate the pension schemes interpretation of qualifying earnings meets the auto enrolment interpretation.

Qualifing earnings

• Salary
• Wages
• Commission
• Bonuses
• Overtime
• Statutory Sick Pay
• Statutory Maternity Pay
• Statutory Paternity Pay (ordinary or additional)
• Statutory Adoption Pay