Auto Enrolment – Don’t give the tax man money for nothing?

Auto Enrolment – Do you want to be hit with a £760,000 fine?  No I didn’t think so!  In which case I’d recommend you read on and find out if it affects you as you may have to take some action.


Even if you don’t currently have staff, worth reading on especially if you are considering employing people at some point.  

Why Auto Enrolment?

The law on workplace pensions has changed.  

Why I hear you ask.





The simple explanation is, people are living longer

  • Currently there are 7 million people under saving for their retirements
  • In 2015 there are 4 people working for every pensioner in UK
  • In 2050 this will drop to 2 people working for every pensioner!


Who will it affect and what is it?

  • Approx 1.8 million UK small and micro businesses.  
  • Every employer with at least one member of staff now has new duties of deciding who is eligible and setting up and including them into a new workplace pension scheme and contributing towards it.  

This is called Automatic Enrolment.  Automatic for your staff, because they don’t have to do anything to be enrolled into the pension scheme, but it’s not automatic for you!  It has to be:

  • A qualifying workplace pension scheme
  • The “qualifying workers” have to be automatically enrolled
  • Employers have to make contributions into employees’ pension every pay period.


When will you be affected?

Well the really simple answer is now.  Very large employers have already started or “staged” as it is termed.  Aprrox 38% of all small and micro businesses will stage in the next year and the peak will be in 2017.

The pension regulator should write to you to confirm staging date.


What happens if you don’t comply and set up a pension scheme?

Well in a word, you get “fined”.  There is a fixed penalty of £400 for non-compliance, as if that’s not bad enough there are daily penalties that range from.

  • £50 per day for a business with up to 4 employees 
  • Rising to £500 a day if you have just 5 employees
  • Through to £10,000 a day where there are 500 or more employees.

That’s severe!!!

We have already heard of a company (not our client I hasten to add!)   🙂    Employing 70 employees, the bookkeeper believed they should be doing something, but the accountant reassured her that there was no rush.  By the time we heard about this, the daily penalties had racked up to a staggering £760,000 by the time this error came to light in June 2015, as they should have implemented Auto Enrolment in 2012!


 What needs to be done?

You need to think about your employees as they will need to be categorised into three groups

  • Eligible
  • Entitled
  • Non -Eligible

Eligible Workers – they must be automatically enroled if:-

  • They are not already in a qualifying pension scheme at work
  • Aged between 22 and State Pension Age (earliest can claim their state pension)
  • Work in UK
  • Earn more than £10,000 in a year (this figure is to be reviewed by the government each tax year

Non Eligible Workers and Entitled workers – they can request to join.  If they ask to join you also have to contribute as the employer

Non Eligible Workers are, UK workers who are either:

  • Aged between 16 and 22 and earn more than £10,000
  • Or are aged between State pension age and 74 earnings more than £10,000
  • Any age of worker earning between £5824 and £10,000 

Entitled Workers are:

  • Workers earning less than £5824 currently and
  • Are aged at least 16 and under 75
  • If an entitled worker asks to join you do not have to make contributions as the employer.


How much do you have to pay in contributions?




Phase 1 – up to Oct 17

1% **

1% **

Phase 2 – up to Oct 18

3% **

2% **

Phase 3 – Nov 18 onwards



** % of qualifying earnings

Qualifying earnings means earnings over the minimum amount currently £5824 up to a maximum currently £42,385.  These figures may rise and is reviewed annually by government.

So for example, someone earning £20,000 , the % pension contribution would be based on £20,000 – £5824 = £14,176 * contribution % at that time!


Can I ask workers not to join?

In simple terms…..NO.  It is illegal to force or try to force a worker to “opt out”, and employers can be fined by the regulator.  So you can’t threaten a pay cut for staying in the scheme or a pay increase for coming out!


So the moral of the story is:-

  1. Know your staging date or find out….
  2. Get organised and don’t leave it to the last minute, there is a lot to do like identifying a pension scheme
  3. Don’t assume someone like your IFA, bookkeeper or accountant will do it for you as it is a completely new task from 2012 so have the conversation and find out what they will or won’t can or can’t do for you
  4. Be prepared.


Sorry to be the bringer of bad news, but this isn’t a 5 minute task, it will require time and effort to implement.  

Like Tax you cannot abdicate responsibility, but you can get help.  If you would like to talk to us about your requirements and how KMA can help you comply so you avoid these fines then please call Kim or David on 0161 410 0021  for an initial chat.

If you would like to see some further information please feel free to download by clicking here…..KMA Automatic Enrolment Service brochure


KMA AE guide



This is my opinion and I am not nor cannot be held responsible for what you do or do not do on this subject or anything related. This is my opinion, belief and my interpretation and I may be considered wrong by the Pension Regulator.  You should take advice before acting upon this document and its content.



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KMA Accountancy
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17 Cecil Road
Cheshire WA15 9NZ

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