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Staff pensions: auto enrolment explained

A programme to encourage all employees, including practice staff, to have pension savings is underway. Kevin Quinn explains how it works.

Auto enrol eligible practice employees in the NHS Pension Scheme if possible (Image: iStock)
Auto enrol eligible practice employees in the NHS Pension Scheme if possible (Image: iStock)

The Pensions Act 2008 set out a legal requirement for UK employers to automatically enrol certain workers into a pension scheme.

This is part of the government’s measures to encourage more retirement savings provision.

A gradual roll out of auto enrolment (AE) is underway and, although GP practices are not required to anything about AE for a while to come, it is a scheme that you need to be aware of.

Assessing employees

One of the first steps for all employers will be to assess their workforce, to determine who must be automatically enrolled in a ‘qualifying’ (approved HM Revenue & Customs) pension and/or who must be offered the right to join such a pension.

There are broadly three categories of employee to be assessed as shown below.

Pension auto enrolment: Who needs to be assessed
Entitled workers Jobholders

Eligible Jobholders

Non-eligible jobholders

Aged 16-74

Aged between 22 & state pension age

Aged 16-21 or between state pension age and 74

Earning below £5,668 pa *

Earning above £9,440 pa *

Earning above £9,440 pa* or aged 16-74 and earning above £5,668* but below £9,440 pa*

Have a right to join a qualifying pension scheme

Must be auto enrolled

 Have a right to opt in to auto enrolment

*2013/14 tax year rates.

NHS Pension Scheme

Where possible, practices must use the NHS Pension Scheme (NHSPS) or its equivalents for Scotland and Northern Ireland as the qualifying pension scheme. 

However, if workers are not able to join the NHSPS for whatever reason (for example, they are already receiving NHSPS benefits, or are agency workers), employers will instead need to offer an alternative qualifying pension scheme (AQPS).

APQS pensions will be subject to minimum employer and employee contributions.

New work-based pension scheme

If an AQPS is required, employers could consider using the new work-based pension scheme called National Employment Savings Trust (NEST).

Note that employees will also include individuals who have opted out of the NHSPS before the ‘staging date’ (see below) as well or are on secondment, sick or maternity leave.

Agency workers must also be assessed, either by the agency or the NHS employer, although agency staff cannot join the NHSPS but can join an AQPS.

Auto enrolment timescale

The AE roll out is on a staged basis between 2012 and 2018.

The Pensions Regulator (TPR) will write to practices in advance to give them the date from which AE will apply. This is known as the ‘staging date’ and will be based on the number of people in the employer’s PAYE scheme.

As AE staging is being applied to large employers first, it seems likely that most GP practices will have staging dates towards the end of the roll out period.

When they know their staging date practices will need to identify and communicate the changes to all affected staff in writing.

You can do so using template letters downloaded from the NHS Employers website.

Penalties for AE breaches

After the initial staging date, practice staff will need to be re-assessed and re-enrolled (as appropriate) every three years. This means that eligible jobholders (see above) who wish to opt out may need to do so on more than one occasion.     

Employers with at least one worker must register with TPR to show that they have a qualifying pension scheme or schemes in place within four months of their staging date.  

Accurate AE records should be kept for a minimum of six years. Financial penalties can be imposed for not complying with the AE rules.

Opting out of AE

To opt out, eligible jobholders must first become active members of their employer’s AE scheme.

Provided they opt out within one calendar month of the later of either the AE date or the date they were given written AE information, these employees will be treated as never having joined the AE scheme.  

The option to opt out within this timeframe is likely to be of particular interest to any eligible jobholders (possibly including salaried GPs) who have HMRC fixed protection for their pension benefits (as any further pension contributions would invalidate fixed protection).

It is also possible that eligible jobholders with HMRC enhanced protection will also want to opt out as any defined contributions into an AQPS would invalidate enhanced protection.  

Processing an AE opt out

To opt out of the NHSPS, eligible jobholders will need to complete form SD502 they must get directly from either the NHS Pensions website or by calling the NHSPS helpline 0300 3301 346: the practice cannot get the form for them.

When the practice receives a completed SD502, it will need to process the eligible jobholder’s opt out request and send the original SD502 to NHS Pensions.

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