Frequently Asked Questions: automatic enrolment

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07 / 8 / 2015 Midnight

These questions cover qualifying earnings, contributions  and Electronic Staff Record (ESR).

Contributions

Exceptions

Multiple roles

 Pensionable earnings

Terms and conditions

Electronic Staff Record (ESR)

Answers

Contributions

Q: Should employers pay the same level of contributions to an alternative pension scheme as they do to NHS Pension Scheme?

A: The statutory minimum pension contributions have been set by law but employers can pay higher contributions if they wish. By assessing your workforce you will have a better understanding of who you will be providing an alternative pension scheme to and this will help inform your decision making process. The majority of NHS staff will receive more than the statutory minimum as they will be entitled to NHS Pension Scheme contributions. The alternative pension scheme will only be provided for those employees who are restricted from actively contributing to the NHS Pension Scheme for example, because they already have maximum service under the scheme, or are already receiving an NHS Pension Scheme pension.

Q: In relation to an alternative pension scheme, are contributions payable on the whole salary or just the amount between the trigger point and the upper earnings threshold?

A: Qualifying earnings are all earnings from wages/salary, bonuses, overtime, commission and the statutory pay elements, between the lower and upper earnings levels. Earnings above and below these limits do not need to be included in the calculation unless the rules of the scheme require it.

Q: Can the employer or the employee choose to contribute to the alternative pension scheme, rather than the NHS Pension Scheme?

A: No. An offer of an alternative pension scheme to someone eligible for NHS Pension Scheme may be seen as an inducement not to join NHS Pension Scheme and would therefore be in breach of the automatic enrolment safeguards. It is only if the employee is restricted from active membership of NHS Pension Scheme that the employer should consider offering an alternative scheme.

Q: Do I have to deduct contributions before someone can opt out?

A: An employee cannot opt out under automatic enrolment rules until they have been automatically enrolled as an eligible jobholder. That does not mean that contributions have to be collected from pay before they can opt out, it means that they cannot sign and date the opt out form until on or after the day they are automatically enrolled or the date on which they have received the automatic enrolment information (whichever is later).

Exceptions

Q: Is there an intention to exempt the NHS from automatic enrolment duties?

A: No, DWP have no intention of exempting any employer or pension scheme from the automatic enrolment duties set out in Pensions Act 2008. They have no existing primary powers to do so. Employers should continue to prepare to comply with their automatic enrolment duties from their staging dates.The DWP consultation referred to possible easements for employers who already provide good pension schemes. This was intended to provoke early thinking and to inform future proposals and does not provide an exemption for any employers.

Q: Do we have to auto enrol employees who are currently on sick leave on zero pay?

A: Existing NHS Pension Scheme membership is maintained during sickness if the contributions continue and this includes contributions on reduced pay e.g. sick half pay. If an employee was on 'sick no pay' then active membership of NHS Pension Scheme would end as there are no contributions being made. Technically an employee who moves on to 'sick no pay' should be considered for auto-enrolment in an alternative pension arrangement but as there is no pay they would not qualify as an "eligible worker" who needs to be enrolled. If pay for an employee who is still on the books resumes NHS Pension Scheme contributions and accrual of membership for benefit purposes should also be resumed. An employee who is not an existing member of NHS Pension Scheme cannot join NHS Pension Scheme whilst on sick leave, for further details please see guidance on the NHS Pension Scheme website regarding eligibility for NHS Pension Scheme. In this situation an alternative scheme will need to be considered if the worker is categorised as an eligible jobholder.

Q: Does automatic enrolment apply to workers with fixed or enhanced protection?

A: From 1 April 2015, the government introduced new rules which provide an exception to the automatic enrolment for anybody with HMRC enhanced or fixed protection. Employees with pension savings above the lifetime allowance (currently £1.25 million) are protected against tax charges. This protection may be lost if the employee is automatically enrolled and the only way to avoid this under current rules is for the employee to opt-out.

The changes allows employees to become exempt from automatic enrolment if they provide evidence of having tax protected status. However, the employer will retain the power to automatically enrol workers regardless of tax protected status if it is more cost effective to do so. Further information on enhanced and fixed protection is available on our annual and lifetime allowance web page.

Q: Do non-execs qualify for automatic enrolment?

A: An office holder is not usually classed as a worker and therefore will not be eligible for automatic enrolment. An allowance for carrying out non-exec duties is therefore not relevant qualifying earnings. Care should be taken so that any payroll trigger does not lead to inappropriate pension deductions being made.

Q: Do I have to re-enrol a worker that has already opted out?

A: Currently, eligible jobholders need to be automatically enrolled even if they cancel their pension scheme membership. New rules from 1 April 2015 means that employers have a choice over whether they enrol an employee who cancels their membership within the 12 months prior to automatic enrolment.

Workers who left a scheme more than 12 months before the automatic enrolment date will have to be enrolled.

Multiple roles

Q: What is the position when an employee has two jobs with the same employer?

A: If the worker holds multiple contracts with the same employer, the employer has a choice in how it manages its automatic enrolment duties. The employer will need to review the contractual arrangements and look at how it currently assesses pensionable earnings from each working arrangement. If the employer already offers access to NHS Pension Scheme under each arrangement then it may wish to class these arrangements as a ‘single employment relationship’ and aggregate the employee’s pensionable earnings. For further information please see Bank staff and workers with more than one contract.

Q: What is the position when an employee has two jobs with different NHS employers?

A: If the worker has two roles with separate NHS employing organisations (with separate PAYE references) both organisations are legally required to assess the worker under automatic enrolment legislation. For further information please see Bank staff and workers with more than one contract.

Pensionable earnings

Q: The definition of Pensionable Earnings under NHS Pension Scheme is different to the definition of qualifying earnings under automatic enrolment. Which definition applies?

A: Where an individual has active membership of a qualifying pension scheme then scheme rules apply. It is acceptable therefore to only allow contributions (whether from overtime or a second job) up to normal whole-time earnings for that job. If an individual qualifies to be auto enrolled but does not qualify for NHS Pension Scheme then an alternative scheme is offered and the automatic enrolment definitions apply.

Terms and conditions

Q: Can you explain the comment from TPR that if we already enrol all staff we must have something in the employment terms and conditions?

A: The Pensions Act 2008 only provides for the automatic enrolment of workers who meet the 'eligible jobholder' criteria. Without a specific provision in a worker's contract, no legal mechanism exists for the automatic enrolment of any other workers.

Q: Within the NHS we have a DB scheme and automatically enrol people on the first date of employment (to those the scheme allows) regardless of age and earnings. Why do we have to sort staff into the 3 categories?

A: The automatic enrolment duties are a legal statute and must be adhered to.

Q: Does the employer need consent from the individual before providing personal details to the pension scheme provider?

A: Section 3 (2) of the Pensions Act requires the employer to make prescribed arrangements by which the jobholder becomes an active member of an automatic enrolment scheme and allows regulations to prescribe what information is to be provided to an occupational pension scheme. The Occupational and Personal Pensions Schemes (Automatic Enrolment) Regulations 2010 detail what arrangements are covered – regulation 6 states employers must give the scheme jobholder information, including name, date of birth etc. This gives the employer the power to pass on the information without consent.

Electronic Staff Record

Q: Will we be able to include automatic enrolment notice letters with Pay slips?

A: McKesson would be unable to identify which letter to apply to which payslip so that will not be possible.

Q: If the ESR system is developed to encompass auto enrolment into a new secondary Pension Scheme, would NI letter/rate also be changed automatically?

A: No the alternative scheme would not be contracted out so it would not need to be changed.

Q: Will the age 22/earning limit auto enrolment send an alert to the employer?

A: No. The system will put them into the scheme as they have to be assessed in the period that the their birthday falls. They will be placed in the system if their earnings are appropriate and a report generated to advise you so you can write to them.

Q: How can ESR assist with assessing worker status?

A: At the assessment date ESR facilities will categorise staff as eligible jobholders, non-eligible jobholders or entitled workers and auto-enrol eligible jobholders into NHS Pension Scheme. However as ESR has no means of currently identifying the reason why someone is not currently in the pension scheme there will be some manual processes required to identify whether these are valid opt outs under auto enrolment rules. Those employees who are restricted from active membership of NHS Pension Scheme will need to be considered for enrolment in an alternative pension scheme. Within ESR it is possible to use folders (by element) to produce a list of all staff with Pension NHS Element and export this into excel. This list will tell you if they are opted out but will not tell you whether or not an individual is restricted from active membership. You can also use the lookup facility to find anyone without the pension element.

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