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How to set up your workplace pension

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Written by Dom James, Financial Content Writer

18 December 2018

If you do not have a workplace pension in place for your employees by your staging date you could face a hefty fine. Here is how to set up a pension suitable for your entire workforce.

Pensions are long term investments. You may get back less than you originally paid in because your capital is not guaranteed and charges may apply.

Get expert help setting up your workplace pension

Auto enrolment advice service

New rules mean you have to set up a workplace pension and automatically enrol your eligible employees. Here is what this means for your business.

How long does it take?

Setting up a workplace pension can take up to 6 months so you need to be prepared.

It can take this long because you need to make sure you fulfill all the new duties set out by The Pensions Regulator or risk paying a fine.

Assess your workforce

On your staging date, you will need to;

  • Automatically enrol eligible jobholders onto a workplace pension on your staging date

  • Give your non-eligible jobholders the option to join (opt in)

  • Give your entitled workers information on joining a pension scheme

Here is how to assess your workforce

Choose your pension provider

If you have not already chosen your pension provider, here is information on the different types available.

Remember to find out whether non-eligible jobholders or entitled workers can opt into the pension providers scheme.

Submit your employee's details

Once you have chosen a pension scheme, you need to contact them and send information for each eligible jobholder in your workforce.

You will also need to submit details of any non-eligible jobholders who have opted in to the workplace pension.

For any entitled workers who do not qualify for your chosen workplace pension, you must find them a different pension scheme which will accept their contributions.

What records should you keep?

You must record and keep the following employee information:

  • Name

  • National Insurance number

  • Opt-in notice

  • Joining notice

You must also record the following information about your pension plan:

  • Pension scheme reference

  • Scheme name

  • Scheme address

This information must be kept for at least six years. The only exception is for opt-out notices which only need to be kept for four years.

You can store this information with your normal employee and business paperwork; but any opt-in notices, opt-out notices or joining notices must be kept in their original format as proof of legal disclosure from your employees.

For more information on which records to keep visit The Pensions Regulator website.

Setting up your payroll

Speak to your payroll department to get the following employee information:

  • Name

  • Address

  • Date of birth

  • Earnings, e.g. salary or wages

You should work out the amount you and your employee need to pay in. Here is how you can calculate your pension contributions.

Do you need to upgrade your payroll software?

At this stage you should know:

  1. Your staging date

  2. Who you need to enrol

  3. Who your pension provider is

suitable payroll software will be able to check the information for all of your workers to see which are eligible for auto enrolment on the anniversary of your staging date, making it easier for you to manage your auto enrolment duties.

Start by checking the accuracy of all of your employee information at least 6 months before your staging date. This will give you enough time to update your system with the correct information for each of your employees.

  • Make sure your payroll software is compatible with your pension provider. This is important to check as it could save you a lot of time and effort in sending employee information on a regular basis.

  • If your payroll software is not compatible with your pension provider, or with the rules of auto enrolment, consider upgrading your software to help support your transition towards your new employer duties.

  • Check with your pension provider how the tax relief will be applied on employee contributions as this will need to be set-up on your payroll software.

  • Check your payroll software lets you manage employees opting in or joining your workplace pension and also lets you issue refunds for those who choose to opt out during the first month.

Once you have set-up your payroll software, you should ask your pension provider whether they have a test system. This will help you check everything has been set-up correctly in advance of your staging date.

Do you need to tell your employees anything at this stage?

Yes, some payroll software gives you the option to print out letters for your employees which explain how auto enrolment will affect them financially.

If your software does not offer you this option, you can ask your pension provider for the relevant information so you can produce the letters yourself.

How to comply with new regulations

Setting up your workplace pension is the first part of the new employer duties; the second part is providing evidence to The Pensions Regulator that you have done everything correctly and compliantly.

Visit The Pension Regulator's website to see their compliance checklist

You will receive a letter from The Pensions Regulator well in advance of your staging date. This letter will include:

  1. Your deadline date for auto enrolment (staging date)

  2. Your 'letter code' (this is 10 digits long and begins with a '1')

  3. A link to the registration process online

You can begin registering your workplace pension before your staging date, but can only complete the registration after the staging date.

When you go online to begin the registration process, you should also have your PAYE reference, which is provided by HMRC. This can be found on your annual tax return documentation.

Registration can take as little as 15 minutes, but it cannot be completed until after your staging date (unless you use 'postponement').

What is postponement?

It is when you can defer the start of your employee duties for up to 3 months. This is only possible from:

  • The date a new employee joins your business

  • The date an employee becomes eligible for auto enrolment

  • Your staging date

Postponing your duties does not officially change your staging date.

Here is an example of how postponement works...

Staging date: 1st April 2020 Postponed date: 30th June 2020 (if choosing the maximum postponement term of 3 months) This means you can start contributing to your employees' pension 3 months later than scheduled. Your staging date is still recorded as the 1st April 2020, and is used to calculate when you need to re-enrol your eligible employees. Re-enrolment is required every 3 years from your staging date. For more information on postponement, visit The Pensions Regulator website.

What information do you need to register?

The registration process has 3 steps.

  1. Get your government gateway ID (an agent user ID is also acceptable)

  2. Register for enrolment (before staging date)

  3. Complete registration (after staging date)

Did you know?

You can use an IFA or accountant to deal with the registration process on behalf of your business.

The information you will need to include on The Pension Regulators website can be broken down into 5 categories:

  1. Information on the person completing the registration - e.g. you, an accountant etc

  2. Information about your business

  3. PAYE scheme details

  4. Pension scheme details

  5. Workforce details - including eligible and non-eligible workers for auto-enrolment

You will need to fill in all of this information for each of your employees to complete your employer duties with the regulator.

Watch this video for a step by step guide on what the registration process looks like

What is next?

Once you have registered all of your pension details with The Pension Regulator, you will have to manage your employer duties for all new employees, any employees who leave your business and all other on-going situations you may face.

How to manage your business for auto enrolment

You can help ensure you have the retirement you want by finding the best personal pension plan to make your money work as hard as it can.

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