Auto-Enrolment Pension Assessment

By May 20, 2016Payroll Outsourcing

Most employers in the UK will have to carry out at least one auto-enrolment pension assessment.  The aim of the assessment is to assign a pension status to your workers, and identify anyone that needs to be placed automatically in a qualifying pension scheme.

This does not have to be complicated, and The Pension Regulator has attempted to simplify and demystify the process.  The employee’s age and earnings need to be taken into account and then action is taken accordingly.

At Payroll Options the auto-enrolment pension assessment can form part of the normal payroll process, allowing a very quick and simple solution.

The timing of the assessment can be more difficult.  The Pension Regulator refers to pay reference periods, which are usually straightforward but with certain pay frequencies can be awkward.  If care is taken it should be easy to assess in the right period, and make the pension deductions at the correct time.

When the assessment is made there are three possible results and then ‘unclassified’ for those employees that do not meet any of the criteria:

STATUS
ACTION
EXPLANATION
Compulsory Employer
Contributions
ELIGIBLE Automatically enrol Earning over £833 in a month, and between 22 years old and the state pension age (SPA). Yes
NON-ELIGIBLE Has a right to opt in Monthly earning from £486 – £833 and between the ages of 16 and 74, or earning over £833 but aged 16 – 21 or the SPA and 74. Yes
ENTITLED Has the right to a pension scheme earns £486 and below, and aged 16 – 74 No
No defined position No action Aged over 74 or below 16

For those employees that join the scheme you do not have to continue to assess them, and their membership will continue until they leave the scheme.  Their contributions may vary in line with earnings, but they would not be removed from the scheme if the status were to change.  All other workers should be assessed each pay period, unless postponed.

It is also possible to operate a contractual scheme, and not perform the assessments.  This is a different way of approaching auto-enrolment, and The Pension Regulator does have some specific guidance.