Understanding Re-Enrolment for Workplace Pensions
- November 30, 2016
- Posted by: Gary Parsons
- Category: Pay, Reward & Benefits
Almost all employers in the UK are now required to provide a workplace pension scheme for their staff, to contribute to worker’s pensions and to automatically enrol eligible staff. Another requirement that is perhaps less well-known is the need to automatically re-enrol certain staff into their scheme.
There are two types of automatic re-enrolment – cyclical and immediate.
The cyclical re-enrolment process
For cyclical re-enrolment, companies are required, once every three years, to restore membership of their workplace pension to any employee who has previously chosen to opt out of the pension scheme, or to cease their membership at any time 12 months or more prior to the re-enrolment date.
This might apply to employees who opted out of the scheme, chose to cease contributions entirely or chose to make contributions that are below the minimum level.
The date a company chooses for its cyclical re-enrolment date must be within a six-month period that runs for three months either side of the third anniversary of their staging date. For example, a company’s staging date – the date on which they were legally required to provide a workplace pension – might have been January 1 2014. The third anniversary of this is January 1 2017, so they can choose to carry out their cyclical re-enrolment any time from October 1 2016 to April 1 2017. Once cyclical re-enrolment has been completed, the company can again choose any date within a six-month window for their second cyclical re-enrolment assessment to be carried out three years later, so in the above example if the company chose March 1 2017 for cyclical re-enrolment, the window would run from December 1 2019 to June 1 2020.
Cyclical re-enrolment is not necessary for employees who are aged 21 or under, or who have reached state pension age, or who earn less than £10,000 (2016/17 tax year earnings), or who are under notice to leave within six weeks after the re-enrolment date, as there is no legal requirement to provide a workplace pension for these individuals.
Once cyclical re-enrolment has been completed, the company must notify The Pensions Regulator by completing a ‘re-declaration of compliance’. This must be done within five months of the cyclical re-enrolment date.
Get Support for Auto-Enrolment Pensions
The immediate re-enrolment process
Immediate re-enrolment is concerned with employees who may previously have become ineligible for their workplace pension scheme. In the 2016/17 tax year, £10,000 is the annual salary someone needs to earn to be legally entitled to a workplace pension. Therefore, if an employee’s earnings drop below this level, then their employer is legally entitled to terminate their scheme membership. However, should their earnings then rise above £10,000 once again, then their scheme membership must be restored on the very same day their salary increase takes effect.
Other situations that may necessitate immediate re-enrolment include:
- An employee starts working overseas, but then returns to work in the UK for the same company
- An employee who had previously announced their intention to resign or retire withdraws their notice and continues to work for the same company
Employees who have been re-enrolled then have one month to opt out of the scheme.
Explore our UK Payroll Services and Get a Payroll Quote
Information contained within this article is intended for educational and illustrative purposes only. The information should not be relied upon and we offer no warranty against its use. Please refer to source one and source two for further guidance.
