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Automatic Re-enrolment – Your Pension Needs You!

22 Jun 2016

Pensions

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“Never confuse a single defeat with a final defeat”
F. Scott Fitzgerald (1896 – 1940)

Employers that went through staging in 2013 will soon be celebrating their three year staging anniversary, if they have not done so already. On your 3rd wedding anniversary it is traditional to receive a gift of leather but for this milestone, employers can expect to receive the gift of ‘automatic re-enrolment’.

What is automatic re-enrolment?

Automatic re-enrolment is designed to place any eligible jobholders who are not in the pension scheme (because they previously opted-out) back into the scheme. Since it is the employer’s responsibility to ensure this process is completed every three years, it is important to understand what is expected of you by both HM Revenue & Customs (HMRC) and The Pensions Regulator (TPR).

Why is automatic re-enrolment necessary?

If you find yourself asking, “What is the purpose of re-enrolling employees to a scheme that they have previously opted out of?” I can assure you that there is good reason. If I had to sum it up in a word, it would be “nudging”;

Nudging employees to join the scheme in order that they benefit from employer contributions and government tax relief
Nudging employees to think about their retirement and plan for it in good time
Nudging the employer to start conversations about pensions with their workforce on a regular basis

By communicating proactively with your employees you can help them understand the benefits of pension entitlement and reduce the risk that they might lose sight of it in the future.

Can employees still opt-out?

Yes. Just like the automatic enrolment (AE) process, an eligible jobholder has a 30 day window from the re-enrolment date to opt-out. If they do nothing they will automatically become a member of the scheme. Re-enrolment just offers these employees an opportunity to re-think their original decision…perhaps their circumstances have changed.

Re-enrolment date? The decision is yours…

You’ll be glad to know you have some control over this re-enrolment process in that you get to select your own automatic re-enrolment date (within certain guidelines of course). The date you choose must be between three months before your 3rd anniversary staging date and three months after. For example:

Choosing your ideal re-enrolment date is an important decision. Aligning this date with other important business and payroll dates is essential for smooth administration.

Anything else to be aware of?

The Pensions Regulator gives clear instructions that written communication must be sent to any eligible employees within six weeks of the re-enrolment date, to explain how automatic re-enrolment applies to them. A re-declaration of compliance must also be completed within five months of the re-enrolment date and failure to do so may result in fines/prosecution.

Automatic re-enrolment is still in its infancy as only the very largest employers have gone through their first cyclical re-enrolment so far. With only seven months under its belt there is little feedback available on how the process is faring thus far and whether The Pensions Regulator has issued any fines for non-compliance. AE is a complex area and we recommend informed guidance to ensure that you are meeting your legal obligations efficiently. For more information, any advice or to discuss an existing scheme that your business may already have in place, our Corporate Team can help. Call Courtiers for assistance or click here to arrange a meeting.

Transcript of video content

Automatic enrolment summary
Automatic enrolment is a government initiative to ensure that employees who have one or more employees provide and contribute to a workplace pension scheme for their employees. The purpose of automatic enrolment is to ensure that both employer and employee make some kind of provision towards their future retirement.
What is automatic re-enrolment?
Employers have to provide a workplace pension but employees don’t have to be a part of that pension. So they can initially opt out of the scheme or they can decide to leave the scheme whenever they like. Automatic re-enrolment means that any eligible employees who have opted out or left the scheme are automatically re-enrolled and they need to physically opt out of the scheme should they wish to not be included.
The Benefits of automatic re-enrolment
The benefit of employees being automatically re-enrolled into the scheme is that it gives them an opportunity to revisit their decision, so the reason why they may have opted out or left the scheme previously may no longer be in existence, but without that physical ‘nudge’ to opt out of the scheme again, they may continue not making contributions when actually they could afford to and wanted to. They could miss out on many years of pension contributions. It also re-focuses the employee and the employer’s mind on the future, retirement planning, and just making sure that people put good thought into how they’re going to secure their retirement without having to rely on the state.
How often does re-enrolment take place and what must employers do?
Employers have certain legal obligations that come with automatic re-enrolment which happens every three years. They need to make sure that they’re writing to any eligible employees within six weeks of their re-enrolment date. They need to submit a redeclaration of compliance within five months of completing their re-enrolment process. But there is some flexibility and they are allowed to select when their re-enrolment date is, within a six month timeframe.
Identifying a suitable re-enrolment date – the six month window
Employers have a six month timeframe where they can select their re-enrolment date. So the way this is worked out is they have their three year anniversary date and then they can select up to three months prior to that date, or three months after that date. So within that six month period the kind of things that employers need to be thinking about is tying things in so that it doesn’t disrupt their day-to-day business. They probably want to align it with payroll cutoff dates. They might want to align it with their tax year end and also they might want to avoid particularly busy periods in their business calendar, to ensure everything runs as smoothly as possible.
Failure to comply
Employers can face potential fines for non-compliance of automatic re-enrolment. We don’t currently have any reported cases of this because it’s very very early days still. The fines will run along the same basis as automatic enrolment though, so they work on an escalating basis from fifty pounds per day to ten thousand pounds per day, depending on how many employees you have.
When should employers start thinking about Automatic Re Enrolment?
Businesses should start thinking about automatic re-enrolment from the moment that their initial automatic enrolment duties are completed. So they’re putting that three year staging anniversary date into their calendars and they always know when it’s coming. In terms of putting actions into place to manage their automatic re-enrolment process, really the second year anniversary date is the cue to start putting actions into place.

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