It's time for auto re-enrolmentby
The vast majority of small employers have yet to reach their staging date; however nearly six million staff have already been put into a pension scheme by the UK’s large and medium employers.
These companies whose duties began from 2012/13 have already started their cyclical re-enrolment process; one that must be factored in by all employers. Although many elements are the same as automatic enrolment, it is still a sizeable task and under statute, companies must offer the opportunity for all eligible employees who have opted-out to re-enrol every three years.
Choosing the cyclical automatic re-enrolment date
The first step is to select a cyclical automatic re-enrolment date. This is the date an employer needs to assess whether to re-enrol certain workers. The employer can choose only one cyclical automatic re-enrolment date which must fall within three calendar months before or three calendar months after the third anniversary of the employer’s staging date.
The cyclical automatic re-enrolment date is also:
- The date from which active membership of a pension scheme must start for those eligible jobholders who are being automatically re-enrolled
- The start date of the joining window (the six week period during which automatic re-enrolment must be completed)
- The start date for the calculation of contributions due to the pension scheme for those eligible jobholders who are being automatically re-enrolled
As it is such a key date, there are considerations to think about:
- An employer may wish to align the cyclical automatic re-enrolment date with other key dates in their business calendar. For example the start of the corporate year, their existing arrangements for re-enrolment under the scheme rules or, for those employers operating a flexible benefits system, the date workers choose their options
- An employer may have seasonal peaks they wish to avoid, as automatic re-enrolment may result in an influx of new pension scheme members along with the associated communication activities
- Postponement is not available for an employer to use at automatic re-enrolment. If an employer does not wish to have part period pension contributions calculations then they may wish to consider choosing an automatic re-enrolment date that is the first day of a pay reference period
Cyclical automatic re-enrolment
Cyclical automatic re-enrolment occurs approximately every three years after an employer’s staging date. Essentially it is a repeat of the process the employer carried out on their staging date (or deferral date if they used postponement to postpone all their workers at staging).
However there are some key differences between automatic re-enrolment and automatic enrolment:
- While both automatic re-enrolment and automatic enrolment apply to eligible jobholders, automatic re-enrolment will only apply to eligible jobholders who have already had an automatic enrolment date with that employer
- Postponement cannot be used with automatic re-enrolment. If the eligible jobholder criteria are met by a worker on the automatic re-enrolment date, automatic re-enrolment must take place with effect from that date
- Crucially, the employer does not have to assess all their workers to identify if any meet the eligible jobholder criteria. Instead they must assess only the workers who have opted out or voluntarily ceased active membership of a qualifying scheme. The assessment of worker categories carried out on the cyclical automatic re-enrolment date is separate to the employer’s usual assessment process, which they run each pay reference period to identify whether automatic enrolment or any information requirements are triggered
There are a number of steps an employer must take to prepare for cyclical automatic re-enrolment. As it is broadly a repeat of what the employer did at staging, some of the steps in getting ready for automatic re-enrolment are the same as those taken when getting ready for automatic enrolment at staging.
- As mentioned above, the first step is to choose the cyclical automatic enrolment date. The employer should then work back from this date to understand when they should take the actions outlined below to prepare for this date
- Engage early with their pension provider to ensure the pension scheme for automatic re-enrolment is ready to process a number of new joiners in a short period of time
- Assess the impact on their business processes and software supporting the administration of the employer duties
- Get ready to manage opt-outs as the eligible jobholder has a one-month period after automatic re-enrolment during which they may choose to opt out. This is the same as for automatic enrolment and so an employer can utilise their existing opt-out and refund processes
In exceptional circumstances an employer may have a re-enrolment duty in respect of a worker who has not yet had an automatic enrolment date. This can only occur where the employer is exempted from the automatic enrolment duty and up to the cyclical re-enrolment date the worker has never met the eligible jobholder criteria but then is an eligible jobholder for the first time on the cyclical automatic re-enrolment date.
Whether it is cyclical or immediate, the process of automatic re-enrolment is the same as automatic enrolment. Once enrolled, the jobholder becomes an active member of an automatic enrolment scheme and has the right to opt out.
Immediate re-enrolment is triggered by the occurrence of specific events, in the main where a job holder’s active membership of a qualifying scheme has ceased because of an action by a third party, i.e. not on the jobholder’s own account. When these events occur the employer must put the jobholder back into an automatic enrolment scheme with effect from the automatic re-enrolment date. However, this automatic re-enrolment date is not the cyclical re-enrolment date. It is a date specific to the jobholder and to the type of event that has occurred.
Details of the re-enrolment events and the resulting re-enrolment dates can be found on page 18 of the regulator’s detailed guidance for employers.
The process of re-enrolment assessment is the same as for AE, which the employer is running as part of their usual monitoring processes each pay reference period. The assessment date is the cyclical automatic re-enrolment date
The employer must make the assessment based on the worker’s circumstances on the assessment date. The assessment can be carried out ahead of time, if the employer is confident that circumstances will not change. Similarly, it may be possible to make the assessment after the assessment date and look back to what the criteria was on the assessment date. However, an employer should be aware that if they choose to do it this way, they will reduce the amount of time available to them to complete automatic re-enrolment as this must be completed within six weeks of the cyclical automatic re-enrolment date.
Unlike at their staging date, the employer does not have to include all their workers in the assessment. On the re-enrolment date, workers will need to be assessed and (if an eligible jobholder) automatically re-enrolled if these conditions apply:
- They are not already an active member of a qualifying scheme
- They are not being monitored every pay period (i.e. they have previously been automatically enrolled or assessed as an eligible jobholder whilst an active member of a qualifying scheme)
- They opted-out or ceased membership of a qualifying scheme more than 12 months ago - or
- If they opted-out or ceased membership of a qualifying scheme within the previous 12 months - and the employer wishes to automatically re-enrol them (i.e. the employer can choose whether to do this or not).
Page 15 of the Regulator’s detailed guidance for employers details which workers can be excluded.
Declaration of compliance
After re-enrolment employers must complete their Declaration of Compliance (DoC) with the regulator to tell them how they have complied with their duty. After staging the DoC is required within five months (four months pre 1 January 2014), however bear in mind that after re-enrolment it is required within two months.
If there are no workers to re-enrol then the re-declare DoC deadline is the day before the three year anniversary of the employer’s previous declaration.
On a final note, outside the normal enrolment duties, some employers may choose to annually re-enrol workers back into the pension scheme if they have ceased membership in the year. Employers may continue to use their existing practices for more frequent re-enrolment but any re-enrolment outside the regular duties is on a voluntary basis. However these employers will still be required to follow the statutory cyclical automatic re-enrolment every three years.
Detailed guidance for employers on re-enrolment is available from the Regulator’s website.
AccountingWEB has launched the No-one gets left behind campaign to alert as many accountants as possible to the obligations implied by auto enrolment. Read our simple eight-point statement which sets out the auto enrolment facts you need to know.