Most employers have passed their automatic enrolment staging date and are automatically enrolling new workers into a pension scheme as a matter of routine. However, employers need to be aware of two important deadlines: a step-up of the minimum defined contribution rates; and cyclical automatic re-enrolment, every three years, of those who have opted-out of membership of the scheme.
Defined Contribution rates
From 6 April 2018, the minimum contributions required to meet automatic enrolment obligations to a DC automatic enrolment pension scheme will increase.
Employers that have not already done so should check their DC pension contribution rates against the minimum rates required from 6 April 2018.
In order to meet the new requirements, some employers will need to increase their contributions, or may wish to increase workers’ contributions, or both, from 6 April 2018.
An employer wishing to increase workers’ contribution rates should take legal advice on the position under their employment contracts.
Cyclical automatic re-enrolment
In addition to their ongoing duties for the enrolment of new workers, employers are now being affected by the cyclical automatic re-enrolment requirement, with the largest employers affected first. This is a requirement, every three years, for every employer of UK workers to re-enrol eligible workers who have opted out of, or have otherwise voluntarily left, their automatic enrolment pension scheme. Workers must then opt out again if they still do not want to be a member.
The automatic re-enrolment exercise must be carried out every three years.
For those workers who have to be re-enrolled, the procedure is in many ways the same as for the initial automatic enrolment exercise but on a much smaller scale there are, however, some important differences: all of the employer’s re-enrolments must take effect from a single date and there is generally no option to postpone automatic re-enrolment.
As for automatic enrolment, employers must declare to the Pensions Regulator that they have complied with their re-enrolment duties.