When will I need to do something?
Secondary Pensions will officially start from 1 July 2024, you must set up a pension for your Employees, and you can start paying into the pension at any time before your deadline date (officially known as the operative date). The deadline is based on the number of people working for you and the table below shows all the different deadlines:
|Deadline Date||Number of workers as at 30 June 2024|
|1 July 2024||26+|
|1 October 2024||11-25|
|1 January 2025||6-10|
|1 July 2025||2-5|
|1 October 2025||1|
The dates shown above are the deadline for setting up your pension scheme and automatically enrolling employees. It is essential that you speak with your Pension Provider well in advance of the deadline as the process of setting up a pension scheme could take weeks or months to complete.
There will be penalties for not complying with the law and this could result in fines, or imprisonment (or both) for you.
Which scheme do we need to use?
- The pension scheme you use must meet the legal requirements and you can get confirmation of this from your Pension Provider. If you haven't set up a pension scheme yet you can do this with a Pension Provider or by contacting Your Island Pension (YIP) to set one up with them. Alternatively, if your employee has an approved scheme they would like you to use you can use this instead, although you do not have to.
How do the contributions work?
- You can choose the level of contributions in your scheme, but they must be the same or higher than the minimum contributions shown below. You can choose to pay all of these yourself so your employee doesn't pay anything, or you can split them between you and your employee, so long as you meet at least the minimum shown below.
- The contributions will increase as time goes on. If your deadline is 1 October 2025 you will have to pay at least 1% each and then from 1 January 2026 this will change to the 2026 rate below.
2024 2025 2026 2027 2028 2029 2030 2031 2032 Employer 1% 1% 1% 2% 2% 3% 3% 3% 3.50% Employee 1% 1% 1.50% 2% 3% 4% 5% 6% 6.50% Overall 2% 2% 2.50% 4% 5% 7% 8% 9% 10%
- You will calculate the contributions using the same calculation you use for their social security contributions. And further information can be found in the Revenue Service Employer Guide.
What happens after we have a scheme?
- If the pension scheme is compulsory in your contract of employment you will just need to make sure it meets the legal requirements and there won't be anything else for you to do.
- If your pension isn't compulsory in the contract of employment, you must enrol employees who are aged between 16 and state pension age, not in full time education, and who pay social security contributions. You will need to give these employees either a Notice of Automatic Enrolment or a Notice of Deferred Enrolment. These notices are used by your employee to confirm which scheme you must put them in, or if they want to opt out. The notices will need to include the following:
- when they will be enrolled into the pension you have set up
- what the contributions will be
- which pension they are going to be enrolled into
- You will also need to give them information on the scheme you have set up and Your Island Pension (YIP) so they can compare them with the YIP scheme (if you haven't used YIP).
Which notice do we need to provide?
- You only need to provide a notice to your employee if your contracts of employment don't make the pension compulsory, or if they aren't already an active member of the scheme when you have to comply with the law.
- The Notice of Automatic Enrolment means you will be enrolling your employee into the pension scheme straightaway, and you need to give them this document at least 7 days before you are going to enrol them.
- The Notice of Deferred Enrolment means your Employee will be enrolled into the pension scheme within the next three months. You can only defer them being enrolled into the scheme once, even if you give them a new contract they need to be enrolled as soon as they reach their 3 month date.
Why do we need to give them a notice?
- If you aren't using Your Island Pension (YIP) or you haven't made the pension schemes compulsory in your contracts, your employee will need to choose between the two pension schemes and decide which one they wish to join. They do this, and decide whether they want to opt out, using the notice you provide them. You can also let them use their own pension scheme if you want, but your employee will need to provide you with confirmation from their Pension Provider that it meets the legal requirements.
- You cannot ask your employees to opt out of the pension scheme, and you aren't allowed to offer any incentives or rewards for them to leave it, for example you can't offer more pay or other rewards to someone if they leave the scheme. There are penalties for doing this.
- If your employee doesn't return their notice, they must be enrolled into the scheme you have set up and this is the scheme they will stay in.
What happens if they want to opt out?
- If they want to leave the pension scheme, they will need to put this onto the notice before they return it. If they have already returned their notice or been enrolled into the scheme, they will need to write a letter to you to tell you they don't want to be in it anymore. There will only be a refund on the contributions if they opt out within 6 weeks of being enrolled.
- If your employee decides not to join the scheme you will be required to automatically enrol them back into the scheme every three years. You will need to tell them what you are doing by giving a Notice of Automatic re-enrolment, they will need to read through this document. Once they have done this, they will complete the relevant sections and return it to you by the deadline you give them.
- When they leave employment, they will need to speak with the Pension Provider to find out their options for their pension pot.
What about my employees who don't meet the criteria, do I offer them a pension?
- If you have employees who don't meet the criteria you can still offer them a pension and you would need to speak to your Pensions Provider to agree how this will work. If you employ someone aged between 16-74 who is not enrolled into your scheme, they can ask to join the scheme and you must allow them to join.