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.
If you employ at least one person, you may have to enrol them into a workplace pension, under the Pensions Act 2008. This is known as 'automatic enrolment'.
The date you have to start enrolling your employees will depend on the size of your business. This is known as the 'staging date'.
If you employ workers you have to set-up a workplace pension for them, however there are some exceptions. These will depend on whether you:
Run your own business
Employ people in your home (e.g. cleaners, personal care assistant etc)
You are required by law to enrol your workers into a workplace pension scheme, but not every employee will be eligible.
If you pay people to work for you at your home, you have to enrol them into a workplace pension if they meet the qualifying criteria. These can include cleaners, gardeners, nannies or personal care assistants.
If you pay an agency, rather than paying the worker directly they will be responsible for enrolling them into a pension.
You do not need to follow the new employer's duties if:
You are a sole director with no other staff
Your business only has director's, none of which have an employment contract
Your business only has directors and only one of them has an employment contract
Your business has either; ceased trading, gone into liquidation or been dissolved
The amount you pay will be a percentage of your employees' qualifying earnings.
To work out your employees' qualifying earnings, you need to deduct the qualifying threshold for pensions (this is £6,240 a year in the 2020/21 tax year) from their yearly salary.
Example: a salary of £30,000 would have £6,240 deducted, leaving £19,124. This means the qualifying earnings is £23,760 and you will base your contributions on this figure.
Your contribution will be deducted from your employee's gross earnings, so your national insurance bill should be reduced as a result.
There is also a tax relief from the government. This will help bump up your employees' total pension contribution each year.
This table shows the level of contribution required up to April 2019:
|Government tax relief||1%|
This depends on the number of employees you have and how many are paid through a single PAYE scheme.
If you want to align your staging date with other key dates in the financial calendar, like when you file your tax return or at the start of the tax year, contact The Pension Regulator.
If you bring your staging date forward, you will have to start working towards your employer duties earlier.
Your staging date will be determined by the first date you pay an employee through a PAYE scheme, as shown in this table:
If you only employ workers through personal service contracts, and do not pay them through a PAYE scheme, your staging date will be 1st April 2017.
Go to The Pension Regulator website and enter:
Your PAYE reference (it can be found on your P6, P9 coding notice or P30BC white payslip booklet).
Your 'letter code' which is a 10 digit code found on your auto enrolment letter (if you do not have this, use this link to find out your letter code). You will then be given your staging date online.
There is a wide range of workplace pension schemes available, but not all of them will accept auto enrolment for employees.
If you have an existing workplace pension scheme; check if it will accept new members through auto enrolment.
If it does not, you will have to find a new workplace pension scheme for any employees not paying into an existing scheme.
Read our guide for more information on preparing your workplace pension.
If you want expert help setting up your workplace pension just complete our auto enrolment form and we will put you in touch with a qualified broker.
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.