Guide to setting up a workplace pension

Since 2018, it has been the responsibility of the employer to ensure that all qualified employees are registered in a workplace pension. This one if for you if you’ve recently hired a new employee and need to set up a workplace pension plan.


What is a workplace pension?

Employers provide workplace pensions, which are not to be confused with the state pension. While the majority of individuals will be eligible for some form of state pension once they reach retirement age, the UK has one of the lowest state pension rates in Europe. To address this issue, the government implemented workplace pensions.

Employees who are eligible are automatically enrolled in the pension plan, however, they can opt-out if they like. Once an employee has joined up, their company will collect contributions from their income and put them into the plan on their behalf, along with their own employer contribution.


Workplace pension rules in a nutshell

These are the regulations for workplace pensions.

if an employee meets all the following conditions, you must immediately enrol them in a workplace pension:

  •  Employed in the United Kingdom
  • Earn more than £10,000 every year (for the tax year 2021-22)
  • You are currently registered in your companies workplace pension plan.
  • Below the age of state pension eligibility (but over the age of 22)

it’s not only full-time employees were talking about. Auto-enrolment is also required for part-time employees, those on short-term contacts, and anybody on parental, maternity, adoption, or carer’s leave.


What happens if my employee is under 22, or earns less than £10,000 a year?

Employees who do not match the auto-enrolment criteria might nonetheless opt to participate in the plan. The guidelines are only in place to decide who must be automatically registered in the workplace pension: other employees are free to opt in.


How much are workplace pension contributions for employers?

The amount you are your workers contribute to a pension fund is determined in part by the scheme you pick. There is a minimal amount to make when it comes to automatic rolling. these are calculated as a percentage of the pensionable wages of the employee.

Employers are currently required to contribute a minimum of 3% of an employee’s pensionable wages to a workplace pension system.

in addition, the employee must contribute a minimum of 5%, for a total contribution of 8%


Is it possible to contribute more than the required amount to a workplace pension?

Yes, it is the bare minimum. If the rules and circumstances of the pension system allow it, you or your employee can make extra contributions.

There may be tax implications for saving more than the annual allowance (£40,000) into a pension during a tax year. Find out more on the Gov.UK website.

As a recruiting and retention strategy, some firms opt to pay increased pension contributions. The economy and the world of work have changed tremendously over the years, and the days of people working in a single job for the rest of their lives are long gone. They’re now far more likely to switch jobs every few years.

The new working environment is reflected in the workplace pension. Employees are increasingly aware of the need of preparing for retirement and prefer to work for a firm with a substantial pension plan. If you’re anxious to recruit the greatest talent, going above and above the bare minimum can just give you the advantage.


What happens if I forget to enrol my employee in a workplace pension plan? 

if you enrol an employee later than you should, you must ensure that you backdate the pension contributions so that they don’t miss too. in other words, they should be in the same position as they would’ve been if the delay didn’t happen. both the employee and you as the employer must make the relevant payments.


How do I set up a pension plan at work?

Setting up a workplace pension scheme can be seriously daunting, so we’ve broken it down into bite-size chunks. in very basic terms, you’ll need to choose your pension provider, and assess your workforce.

Choose your pension provider 

There are plenty of workplace pension companies to choose from. and sorting through them may be a pain. Having said that, its rather simple to establish a shortlist after you’ve figured out what your searching for. if you have any questions, there also typically really helpful.

The majority of firms opt for a “defined” pension plan. These pensions have long been considered the gold standard, and they’re easy to set up and manage. Well, take a closer look at this immediately.


What do I need to offer each type of worker?

Although you are responsible for providing each sort of employee with the opportunity to join a pension plan, they do not all need to be on your company’s plan.

Eligible jobholders

All eligible jobholders must be enrolled on a pension scheme by the time they start working for you.

They must be auto-enrolled, but they can opt-out within 30 days if they want to. Having said that, as a reasonable and responsible employer it’s well worth making them aware of the pension scheme’s benefits so they can make a really informed decision.

As part of their initial auto-enrolment, you also need to explain to them.

  • How much they will Individually contribute to their pension from their earnings
  • How much you, as their employer, will be paying in (remember, this must be a minimum of 3%)
  • What tax relief will be applied by the government
  • How can they opt-out if they want to?

Regardless of the pension provider you choose, you will receive all of the above information and more. It’s critical that you convey the scheme’s contents to your employees and maintain everything open and transparent.

If an eligible jobholder chooses to opt-out after three years, the auto-enrolment process must be restarted. They’ll be given the chance to opt-out once again, and the process will repeat every three years.