How to Set Up a Workplace Pension: Step-by-Step Guide

Why Setting Up a Workplace Pension Matters

Workplace pensions are not just a legal requirement; they’re an essential employee benefit that contributes to your team’s financial well-being. By automatically enrolling your employees in a pension scheme, you help them save for retirement while benefiting from tax relief and your employer contributions.

Step 1: Determine Your Duties Start Date

Your ‘duties start date’ is the day your first employee begins working for you. From this date, you have up to six weeks to set up your workplace pension scheme. It’s crucial to identify this date early to avoid potential penalties from The Pensions Regulator.

Step 2: Choose the Right Pension Provider

Selecting the right pension provider is key. Consider factors like fees, investment options, and ease of administration. Many providers offer comparison tools to help you make an informed decision. Read our article Who are the Best Workplace Pension Providers in the UK? to compare different providers and ensure you find the best fit for your business and employees.

Step 3: Set Up the Pension Scheme

Once you’ve chosen your provider, the next step is to set up the scheme. This involves:

• Registering with the provider
• Setting up your payroll to handle pension contributions
• Communicating with your employees about the pension scheme

We recommend using an automated system to minimise your administrative burden. Our platform integrates seamlessly with most payroll software, ensuring contributions are deducted and paid into your pension scheme on time.

Step 4: Identify Eligible Employees

It’s a legal requirement to enrol and make an employer contribution for all staff who meet the following criteria on their ‘duties start date’:

• Aged between 22 and the State Pension age
• Earn at least £10,000 a year (£833 monthly, £192 weekly) before tax
• Normally work in the UK, including those who travel abroad for work

Step 5: Decide Contribution Levels

You are required to pay a minimum of 3% of your employee’s ‘qualifying earnings’ into their workplace pension scheme.

Under most schemes ‘qualifying earnings’ is an employee’s total earnings between £6,240 and £50,270 a year before tax. Total earnings include:

• Salary or wages
• Overtime
• Commission and bonuses
• Statutory payments (sick, maternity, paternity, adoption pay)

Step 6: Communicate with Your Employees

Transparency is key. Clearly explain the pension scheme to your employees, including their rights and how they can manage their pensions.

Penfold offers customisable templates to make this process easier. We provide clear, jargon-free information to help your employees understand their pension benefits.

Step 7: Declare Compliance

After setting up your workplace pension, you must declare your compliance to The Pensions Regulator. This declaration confirms that you’ve fulfilled your legal duties. Failing to declare compliance can lead to significant fines, so ensure this step is completed promptly.

Step 8: Manage the Workplace Pension Scheme

Once your scheme is live, ongoing management is essential. This includes:

• Monitoring employee eligibility: Enrol any staff who meet the eligibility criteria after a change in their age or earnings, and notify them within 6 weeks.
• Ensuring timely contributions: Deduct contributions every month and pay them by the 22nd day of the following month.
• Handling join and leave requests: Action requests from staff to join or leave your pension scheme within 1 month of the request being made.
• Enrolling new staff: Ensure any new employees who meet the eligibility criteria are added to your pension scheme.
• Maintaining records: Keep records of the names and addresses of enrolled staff, the dates when contributions are made, any requests to join the pension scheme and the pension scheme reference or registry number (PSR) for six years. Keep requests to leave the pension scheme for four years.

Our service helps you stay compliant by automatically tracking and notifying you of these details, saving you time and reducing the risk of errors.

Step 9: Re-enrolment and Re-declaration

Every three years, you need to re-enrol eligible employees into your pension scheme. This applies to those who:

• Opted out more than 12 months before the re-enrolment date
• Are contributing less than the minimum required level

Re-enrolment does not apply to staff who stopped contributions within 12 months of the re-enrolment date.

If an employee left your pension scheme within 12 months before your re-enrolment date, you can either re-enrol them on that date or wait until the next re-enrolment in three years if they’re still eligible.

Notify eligible employees within 6 weeks of re-enrolment that they’ve been re-enrolled in the pension scheme. You must also complete a re-declaration of compliance with The Pensions Regulator, even if no one was re-enrolled.

How Penfold Can Help

Setting up a workplace pension doesn’t have to be complex. Penfold simplifies the process, helping you set up and manage your pension scheme with ease.

With Penfold, you benefit from:

• Auto Enrolment Support: Our experienced team can help you maintain compliance with auto-enrolment duties.
• User-Friendly Platform: Our platform simplifies the entire process, from setup to ongoing management.
• Great Employee Experience: Our app is designed to make pensions accessible and engaging for your team.
• Stronger Client Relationships: Accountants and advisors can enhance their service offerings with our support.

Ready to set up your workplace pension? Sign up for free or contact us for a free consultation and discover how we can help you get started with ease.

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