I am the MD of a small company with six employees. My FD died last year so I am taking over his responsibilities. My accounts administrator tells me I must review our staff pension scheme this year and go through auto-enrolling those who have previously opted out. Is this a requirement and, if so, what does a review entail?
You are indeed obliged to go through a process every three years in which you assess your employees and re-enrol those employees who have opted out since your last re-enrolment date if they qualify in terms of their age and earnings (this is optional if they have opted out in the last 12 months). They can then choose either to remain in the scheme or opt out again.
You must go through the re-enrolment process within six weeks of your re-enrolment date – normally the three-year anniversary of your original staging date or last review.
You have duties surrounding the re-enrolment: you must write to the employees affected to explain that they have been re-enrolled and to tell them that they have the right to opt out again if they so wish. You can get template letters from the Pensions Regulator website. You mustn’t influence their decision – there are fines for employers who contravene this rule.
Following the re-enrolment process, you should also complete a declaration of compliance with The Pensions Regulator. This is normally due within five months of your re-enrolment date. The declaration will ask you to confirm your qualifying staff numbers, if you have re-enrolled any employees, details of your business and your pension scheme. You can get details of what’s involved from the Pensions Regulator website.
Your final duty is to ensure that your scheme remains fit for purpose and meets the current regulatory requirements. While this isn’t strictly associated with the three-yearly process, it is a good time to review what you have in place. It may simply be a case of asking your pension provider to confirm that the scheme remains suitable, or you may feel that a wider review would be beneficial, particularly if you have doubts about it meeting your ongoing needs. If this is the case, I suggest you meet with an independent financial adviser who specialises in workplace schemes.
Any opinions expressed in this article do not constitute advice.