The top tips you need to help you sail through auto-enrolment

Auto-enrolment isn’t as scary as you think – here’s what you need to do and when you need to do it to avoid a hefty fine…

Almost a million small firms are set to offer their staff a pension over the next 12 months. That’s a huge number of new business founders and start-ups dealing with something they’ve got no experience of – and possibly aren’t even sure where to start.

A survey conducted by YouGov on behalf of workplace pension provider Smart Pension, found more than 50% of small firms felt auto-enrolment would be a burden and 40% said it was unfair, – but the data also found that 72% of them said it wouldn’t get in the way of growth plans.

The good news is, it’s not as hard as you think; and in April the Government confirmed that start-ups – who from October will all have to offer a pension to eligible staff – can now defer for three months in line with other small businesses.

So, how do you get going? How do you find the best and most cost-effective scheme? And what do you need to do to avoid a hefty fine?

When do I need to offer a pension?

If you haven’t already got it, the first thing to do is to check your staging date, which can be found here or by contacting The Pensions Regulator (TPR). Start-ups now have the ability to delay it by up to three months if there’s a good reason.

Signing up to the Government Gateway – the centralised online registration site for all government services – is essential as you will eventually have to use this website to show you have completed auto-enrolment (worth remembering if you want to avoid a fine).

How do I choose a provider?

These are the things you need to look out for:

  • The Master Trust Assurance Scheme test – a good place to start looking is TPR’s list on its website. It displays schemes that have passed this rigorous test and is the gold standard for master trust quality
  • A scheme that is free to employers – there are firms that will charge a sign-up fee and ongoing fee, while others are totally free to the employer
  • Make sure the provider has a Defaqto rating – an independent audit and another sign of quality
  • Ensure funds are overseen by the Financial Conduct Authority (FCA) – the independent financial regulatory body for the UK
  • A fast sign up process – a lot of firms make you fill in reams of laborious paperwork – this is just not necessary; small firms and start-ups can complete the process in minutes
  • Payroll compatibility – in the future auto-enrolment will simply be a piece of software that happens automatically every week or month and plugs in to your existing accounting and payroll software. Make sure the scheme you use is capable of adapting to range of systems now and into the future
  • Transparent administration fees – small business founders are no experts in pensions and the finer points; in the big wide world there is a lot of variation in charges to employees to look out for and not all of them are easy to spot (see comparison tables here)
  • Guaranteed acceptance – not all firms accept all sizes of company and employee pay brackets; check the firm you have chosen will accept you from the outset

Who is eligible for a pension?                    

Any member of staff aged between 22 up to state pension age that earns over £10,000 a year (or £833 a month or £192 a week) MUST be automatically enrolled into a pension scheme. Other staff that aren’t automatically eligible but can ask include:

  • Those aged between 16 and 74 and with earnings of more than £5,824 but below the £10,000 auto enrolment threshold
  • Those aged between 16 and 21 or between state pension age and 74 and with earnings above £10,000 a year


This is easy to get wrong – the rules on assessment are fiddly and subject to change and the onus is on the employer. Choose a provider that assesses staff and generates the letters and communications automatically and for free so you are compliant with the Regulator’s requirements. Failure to comply with these seemingly simple elements could lead to a £400 fine.

How to plan for the extra costs

If you’re handling auto-enrolment yourself, you can easily save on the costs of advice. According to TPR, advice can cost anything between £200 to £1,000. However, handling the ongoing costs means you will end up deciding how to fund the ongoing contribution costs on gross qualifying earnings. At the moment this is 1%, but will rise to 2% from April 2018 and 3% from April 2019. It may be that you have to budget for this through lower pay rises, a reduced salary (salary sacrifice), or simply view it as an investment in your workforce.

Declaration of compliance

A Declaration of Compliance must be completed and submitted to The Pensions Regulator within five months of the staging date. It’s an online form and can be submitted through the Government Gateway. This applies even if you have set up a scheme and all your staff have opted out. If you don’t you will be fined £400.

Ongoing responsibility

Once everything is in place, there is still a responsibility on the employer to monitor things going forward. These include:

  • Checking staff ages and incomes in case they become eligible later – and offering them a pension if they do
  • Managing requests to join, opt out of or leave the pension scheme
  • Keep good records

You can download Smart Pension’s free e-book Auto Enrolment – The Essential Guide to Workplace Pensions for SMEs here.


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