Automatic Enrolment - Glossary of Terms

Already Enrolled in a Qualifying Scheme

An Employee who has already been paying in to a qualifying pension scheme, and who’s employer is already paying at least the minimum amount in to their scheme. These employees do not need to opt in to another scheme.

Basis (Phased)

It should be noted, that new minimum employer pension contribution levels will be gradually introduced over the following five years (from October 2012 to October 2017)

• From Oct 2012 to Sept 2016 – 2% of qualifying earnings with a minimum of 1% from the employer (1% Employee and 1% Employer)
• From Oct 2016 to Sept 2017 – 5% of qualifying earnings with a minimum 2% from the employer (3% Employee and 2% Employer)
• From Oct 2017 – 8% of qualifying earnings with a minimum of 3% from the employer. (5% Employee and 3% Employer)

Basic (Quick Start)

Employee’s can choose to pay the higher rate of pension from this year without waiting until 1st October 2017.
From Oct 2012 – 8% of qualifying earnings with a minimum of 3% from the employer. (5% Employee and 3% Employer)

Ceasing Membership

Jobholders can choose to cease membership of the scheme at any stage, but they will not be entitled to a cash refund of contributions after the end of the opt out period under the regulations. Instead they will retain the benefits they have built up in the scheme to that date but will not build up any further benefits. In these cases neither the employer nor the employee contributions would be refunded. However the timescales for obtaining a refund under the scheme rules may be different so employers should check their scheme.

Eligible Jobholders

Called this because they are eligible for automatic enrolment. These are workers who:

• are aged between 22 and state pension age
• are working, or ordinarily working, in the UK
• have qualifying earnings payable by the employer in the relevant pay reference period that are above the earnings trigger for Automatic Enrolment (2015/16 £10,000)

Employees exempt from automatic enrolment

Not all new employees need to be automatically enrolled. If your employee is:

• under 16
• over 74
• a temporary or casual employee 
• a casual agricultural worker 
• a private domestic worker 
• on a work permit or visa 
• changing jobs but not changing payroll 
• a contractor 
• a shareholder-employee 
• a working partner of a partnership 
• working owners of a look-through company 
• a seconded employee

Enrolled

Is when an employee is set up within a qualifying scheme. The employer must continue to make contributions to the employee’s pension scheme.

Enrolment Time

When the staging date for the company has arrived, a message will appear for each employee reminding the payroll administrator to commence enrolment.

Enrolment CSV File

You can enrol workers by uploading a CSV file to NEST. You will have assessed your workers beforehand to ascertain which ones to enrol. You can upload CSV files that are up to 2MB in size. Larger files can be uploaded using secure file transfer protocol (SFTP) or enrol workers one by one online.

 

Entitled Worker

Entitled workers are thus named because they are ‘entitled’ to join a pension scheme. These are workers who are aged between 16 and 74, are working or ordinarily work in the UK under their contract but do not have qualifying earnings payable by the employer in the relevant pay reference period. Entitled workers do not need to be automatically enrolled. However, they do have a right to join a pension scheme. An employer is obliged to give their entitled workers information within one month of the date on which they become an entitled worker, or if the staging date has passed, the entitled worker’s first day of employment.

Employee Contribution

Minimum employee contribution is 1% which will rise to 5% by 2018 – after tax contribution is 0.8%, however different contribution levels are allowed – with NEST there is a “quick Start” option of 5%.

Employer Contribution

The amount the employer pays into the employees’ pension. The minimum requirements are:

• From Oct 2012 to Sept 2016 – 2% of qualifying earnings with a minimum of 1% from the employer (1% Employee and 1% Employer)
• From Oct 2016 to Sept 2017 – 5% of qualifying earnings with a minimum 2% from the employer (3% Employee and 2% Employer)
• From Oct 2017 – 8% of qualifying earnings with a minimum of 3% from the employer. (5% Employee and 3% Employer)

Group

Different levels of contributions can be used for different sets of employees e.g. shop workers may be set up using the 1% EE and 1% ER levels whereas management may be put straight on to the quick start 5% EE and 3% ER levels (these levels will apply to everyone in 2018). The different categories of workers should be split into group names e.g. shop workers, managers. If the contribution levels are the same for all employees only one group name is required. Additional groups will also be required where there is more than one pay frequency e.g. weekly & monthly payroll.

Non-Eligible Jobholder

Aged between 16-21 or from State Pension Age to 74. Must be working in the UK and earning above £10,000 per year. OR aged between 16-74, working in the UK, earning above £5,824 but below £10,000. These employees have a right to opt in to a scheme and the employer must make contributions on their behalf.

NEST Scheme

NEST is a workplace pension scheme created as part of the government’s pension reforms to help employers meet their new auto enrolment duties.

Opting Out

Is when a staff member decides to leave your pension scheme within a month of being enroled. Staff automatically enrolled and those who have opted in can choose to opt out.
Employers must not actively encourage their staff to opt out. Any decision to opt out must be taken freely by the staff member without influence from the employer.

Key points

• Staff who have been automatically enrolled or who have opted in have the right to opt out.
• The decision to opt out must be taken freely by your staff member.
• Staff cannot opt out until after they’ve been automatically enrolled.
• Employees opt out by getting an opt-out notice from the pension scheme which they then complete and give to you.
• You must issue a full refund of any contributions the staff member has made within a month of receiving a valid notice.

Opt Out Reference

Employees will be entitled to opt-out of the company pension scheme should they decide they do not want to participate. Employees who provide notice within the official opt-out period will be put back to the financial position they’d have been in had they not have become members in the first place. This would entitle them to a contribution refund of any payments made after auto enrolment took place.
If an employee decides to opt out, they need to contact the pension provider who will provide them with an opt out reference, which they must then give to their employer.

Qualifying Earnings

Earnings in the following band - LEL £5,824 and UEL £42,385 for 2015/16

Qualifying Scheme

The scheme the company is paying the pension into. This scheme must meet the minimum contributions based on qualifying earnings

Payment Source

Is a reference to where the contributions are to be paid from e.g. bank account name. If all contributions are being paid from one bank account, only one payment source is required. Payment source will be entered when setting up the scheme with the provider.

The Pensions Regulator

The Pension Regulator (TPR) Is the Government body that regulates work-based pensions in the UK.

Postpone Assessment

Postponement allows employers to delay the assessment of their workers for a period of up to three months until a date known as the deferral date.

Reduce contributions by basic rate

The basic tax rate is 20%. The employee’s contribution towards their pension can be reduced by the basic tax rate and is then topped up by the government when remitted to the pension provided. Example. If the employee’s contribution is 1%, this would be reduced by 20% to 0.8% of a contribution, when remitted it is then topped up to 1%.

Refund of Contributions

Once an employee chooses to opt out from the qualifying scheme, the employer must refund the employees contributions to the employer. This must be done by the last day of the following pay period. E.g. the employer is given a valid opt out notice on the 25th of May; the refund must then be given by the 30th of June (monthly Payroll). The employer can then claim a refund from the pension provider for contributions made to the employee.

Registration Date (Declaration of Compliance)

The registration deadline is five calendar months from the staging date. For example, if the staging date is 1 November 2015, you must submit your registration to the pension regulator no later than 31 March 2016.
If your registration deadline falls on a Saturday, Sunday or public holiday, you can provide your registration on the next working day.
If you’ve postponed automatic enrolment for any of your staff, you mustn’t submit your registration until after the postponement period has ended.

Staging date

An employer’s staging date represents the point they should have everything in place to comply with their automatic enrolment duties. Every employer will have a date from when the automatic enrolment duties come into force for their business.