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Terminology

Active member

A member of an occupational pension scheme who is at present accruing benefits under that scheme in respect of current service.

Automatic enrolment

Employers have legal duties to enrol eligible jobholders into a qualifying workplace pension scheme and make contributions towards it. The action of enrolling the employee into the pension scheme is the responibility of the employer. A jobholder who has been automatically enrolled can opt out and receive a refund of the contributions they have paid.

Basic salary

The normal annual salary excluding bonuses, overtime or any other additional payments.

Contribution schedule

Contributions schedules are how payments are made into the pension scheme chosen for auto enrolment and are required to be paid before the 22nd of the following month of each pay period.

These amounts will match what is listed on the payslip.

Duty start date

The duty start date is the expected date for employers to begin their auto enrolment duties. Duty start dates begin on the first working date of their first employee.

DWP

Department for Work and Pensions. The DWP created and now manage the legislation and policies for Autoenrolment.

Eligible jobholder

An eligible jobholder is a worker that has been assessed for auto enrolment and is between 22 and state pension age earning over the equivalent of £10,000 per pay period. These figures are reviewed each year by the DWP.

Entitled worker

An entitled worker is aged between 16 and 75 who earns below the Lower Earnings Limit. These workers do not have to be enrolled into a pension scheme. They can choose to join the scheme; however, the employer would not be required to pay pension contributions.

Employer duties

The Pensions Act 2008 established new duties for UK employers to provide their workers with access to a workplace pension scheme that meets certain legal requirements. Employers must automatically enrol certain workers into a qualifying pension scheme and pay contributions on their behalf.

The duties started in October 2012 and applied to the largest employers first. From 2018 every employer in the UK must provide a workplace pension.

HMRC

HM Revenue and Customs. Formed in April 2005, following the merger of Inland Revenue and HM Customs and Excise Departments, HMRC determines the tax environment within which pension schemes operate.

Minimum contributions

The minimum amount that needs to be paid into a member’s retirement pot under the employer duties. This minimum has been introduced gradually and will rise to 8 per cent of qualifying earnings by 2019. At least some of this must be paid by the employer, although the employer can pay more, or all of it if they want to.

National Employment Savings Trust (NEST)

NEST is the name for the personal accounts scheme that was established following the Pensions Commission’s review of the UK pensions system.

It is run by NEST Corporation, which is a public body accountable to the government via the Secretary of State for Pensions and the Department for Work and Pensions. NEST will be the default pension scheme for those employees whose employer does not offer an appropriate alternative arrangement.

Inducement

An attempt to persuade employees to opt out or leave the pension scheme by the employer. This is illegal and carries its own set of fines for employers based on the number of employees affected.

Lower Earnings Limit (LEL)

This is a threshold for Auto enrolment that is used in the employee assessments and contribution calculations.

Opt-in

Workers that have not been Automatically Enrolled can chose to opt-in to the pension scheme. The employee must submit a formal notice to the employer in writing requesting to join the scheme.

Opt-out

Workers that are Automatically Enrolled into the pension scheme can opt-out of the pension scheme receiving a refund of the full amount paid into the pension scheme. A worker can only opt-out within the first month of being Auto Enrolled. If the worker wishes to leave the pension scheme after this point it is referred to as a ‘cease membership’ and no refunds will be due.

Non-eligible jobholder

A worker that either is outside the age thresholds for Auto enrolment and earning above the lower earnings limit or within the age threshold earning between the lower earnings limit and Auto enrolment threshold.

PAYE reference

A PAYE reference number identifies which tax office is associated with a worker and their employer.

Pay reference period

This is how often an employer pays its workers. For example, a pay reference period might be weekly, fortnightly, monthly or every four weeks.

Pensionable earnings

Pensionable earnings are the earnings that are used to calculate the employer and employee contributions. This can be defined by the employer on specific criteria.

Pensions act 2008

The legislation that established the new employer duties. This means UK employers will have to provide some or all of their workers with access to a workplace pension scheme that meets certain legal requirements. Employers will also have to automatically enrol certain workers into a qualifying pension scheme and pay contributions on their behalf.

Qualifying earnings

Qualifying earnings is the name given to a band of earnings that you can use to calculate contributions for auto enrolment.

Qualifying pension scheme

A workplace pension scheme that meets certain minimum standards.

Relief at source

The method of tax relief on contributions into members’ retirement pots.

Salary sacrifice

A written agreement between the employer and employee whereby the employee forgoes part of his/her future earnings in return for a corresponding contribution by the employer to a pension scheme.

This is not the same as an AVC (additional voluntary contributions), which is paid by the employee.

Scheme Rules

This refers to the legal rules of the pension scheme. They sit alongside the order and set out how the pension scheme operates.

Staging date

The staging date is when the employer is required to begin their legal duties for Auto enrolment. These were defined on set criteria until October 2017 where all employers were expected to begin Auto enrolment immediately on the first employee start date. The dates over October 2017 are referred to as ‘Duty Start Dates’.

State Pension age

This is the age when people normally start getting their State Pension. From December 2018 the State Pension age for both men and women will start to increase to reach age 66 by October 2020. These changes are set out in the Pensions Act 2011.

TPR

The Pensions Regulator are the governing body that enforce the Auto enrolment legislation on behalf of the DWP.

Tax relief

The money the pension scheme claims from the government based on what members pay into their retirement pots and HMRC rules.

Total salary

The full amount that the employee is paid for their work, including any bonuses, overtime or additional payments.

Worker

A person who works under a contract of employment or any other contract which requires them to work or perform services personally for another person or organisation.