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What do we need to do? (Pension scheme not included in contract of employment)

Glossary - Key Terms Contact Us - Secondary Pensions

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If your contracts of employment do not make membership of your pension scheme compulsory, your employee will be able to opt out of the pension scheme and you must automatically enrol them every three years.

You have the option of deferring the enrolment for your Designated Employee for 3 months, for example you might want to do this if they have a probationary period and have objectives or milestones you expect them to meet before joining the scheme. Further details on this can be found in the information below under the heading: 'You can postpone the enrolment into the pension scheme for your employee for a maximum of 3 months'.

This Law requires, subject to certain conditions, the following:

  • You must provide a pension scheme that meets the legal requirements

    • If you haven't already provided a pension scheme, you will need to provide a scheme that your employees can join. 
    • You can do this by registering with a pension provider of your choice and setting up a pension scheme. To ensure that everyone will have access to an affordable pension scheme the States of Guernsey have facilitated the establishment of Your Island Pension (YIP). YIP is separate from other States functions and is governed independently by Sovereign Pension Services (CI) Limited. Employers will be able to use this scheme, or another eligible scheme of their choosing.
    • Pension providers will be able to give you confirmation that they meet the legal requirements, any pension schemes that meet the standards are officially referred to as an approbated pension scheme. If you are using a defined benefit scheme they must include an actuary's report to confirm that it meets the standards and you will need to ask them to provide this to you on a regular basis. Your pension provider will let you know if this applies to your scheme.
    • If you already have a scheme set up, you must check with your pension provider to make sure your pension scheme complies with the Law. Your pension provider will be able to tell you if anything needs to change. If you haven't discussed this with them already, make sure you get in touch with them to review this as soon as possible. 
    • Your Designated Employee may have a private pension arrangement that they already pay into; if your pension scheme isn't part of their contract of employment and they can provide you with confirmation that it meets the legal requirements, they would be able to ask you to pay the contributions into their pension rather than any other scheme. Whether you decide to accept their request, use a scheme you have set up, or YIP, is up to you. If you decide to only offer the use of private pension schemes on a case-by-case basis or only to certain groups in your workforce, you will need to make sure that these decisions are not discriminatory.
  • You must automatically enrol Designated Employees into the scheme or enrol them back in every 3 years if they opt out

    • If your employee meets the eligibility criteria they are known as a Designated Employee; you must enrol Designated Employee into the pension scheme automatically, and you must provide them with either a Notice of Immediate Enrolment or Notice of Deferred Enrolment.
    • You can make membership to the pension scheme compulsory through your contracts of employment. If you do this, your Designated Employees won't be able to opt out of the scheme and you would only need to enrol them at the start of their employment. You would not be required to provide them with a Notice of Immediate Enrolment or Notice of Deferred Enrolment.
    • If you do not make your chosen pension scheme compulsory in your contracts of employment you must offer your Designated Employee the option of joining the pension scheme you have set up, or the Your Island Pension (YIP) scheme. This needs to be done either on or before their first day of employment, or the operative date. You must do this by giving them a Notice of Immediate Enrolment if you intend to enrol them straightaway, or a Notice of Deferred Enrolment if you are going to delay their enrolment. 
    • Your Designated Employee will need to decide which scheme they wish to use before any contributions are paid across to your pension provider. You will need to confirm the deadline date on the relevant Notice and you must enrol them no later than 7 days from the date of the Notice. For anyone who is joining your organisation after the operative date it is advised that you incorporate the deadline date, and highlight that they have a decision to make, into their contract of employment or welcome letter too, so that you both have a record that they have been notified of this. The Notice will provide your Designated Employee with warning that you will be making deductions and for them to confirm their choice. If your Designated Employee doesn't make a choice on which scheme they want to use by the deadline date, or they fail to return the completed Notice to you, you must enrol them in the pension scheme that you have set up.
    • If you currently do not allow your employees to join your pension scheme until they reach a certain age, or length of service, this will need to be reviewed. You will need to make sure that you enrol all Designated Employees and allow all your Guernsey and Alderney resident employees, aged between 16 and 75 years of age, to join your scheme or provide a scheme for them to join. This could be a private scheme or YIP. However, you will need to ensure that the scheme you offer to these individuals is not discriminatory.
    • You have the option of deferring the enrolment for your Designated Employee for 3 months and further details on this can be found in the information below under the heading: 'You can postpone the enrolment into the pension scheme for your Designated Employee for a maximum of 3 months'
    • If a Designated Employee wants to opt out after a Notice has been completed, they need to write to you to make this change and you will need to keep this document for 7 years. You will also need to update Returns Creator or your payroll software to reflect this decision.
    • You are required to keep a record of the date a Designated Employee opts out and every 3 years on the anniversary of this date you will be required to enrol the Designated Employee back in. This is re-enrolment and you have up to 3 months from this anniversary to complete it. This means that you would be able to enrol your Designated Employees back in on a quarterly basis, which may help keep your administration to a minimum if you have a large workforce to keep track of. 
    • When you enrol your Designated Employee back into the scheme you are not obliged to provide them with the same scheme you originally placed them in. Schemes can change over time, and the contribution percentages may have changed, or you might have decided to change pension provider since you originally enrolled them. The scheme you use must always meet the legal requirements; you will also need to make sure your Designated Employee has been given a Notice of Automatic Re-Enrolment before they are re-enrolled. If they fail to make a choice or return the completed Notice to you by the deadline date, you will need to enrol them into the pension scheme you have set up. 
  • You must pay at least a minimum level of secondary pension contributions if they remain in the pension scheme

    • The contributions are usually made up of employer contributions and employee contributions, and the amounts to be paid will depend on the pension you have set up. The minimum contributions that need to be made are a percentage of the earnings of an employee and the overall amount can be paid by the employer. Although you can exceed the overall amount and pay this entirely, you are not able to ask the employee to pay your percentage, therefore if you are following the minimum contributions you cannot ask them to pay part, or all of your contribution too. Further information on this can be found within the How much do we need to pay? page.
  • You cannot prevent a designated or Voluntary Employee from joining the scheme or encourage them to opt out of it once they are in

    • You can't ask these individuals to leave the scheme whilst they are working for you and you are not allowed to offer any incentives to leave it either, so you can't offer more pay or any other rewards to someone if they leave the scheme. It is not acceptable to dismiss someone for refusing to opt out of the scheme. We hope employers will not try to use the membership or potential membership of a secondary pension scheme as a reason not to employ someone. The States of Guernsey will review and consider whether any enforcement measures are needed if recruitment decisions are made based on the membership of a pension scheme.
  • You can postpone the enrolment into the pension scheme for your employee for a maximum of 3 months

    • You can postpone when you enrol your employee into the scheme, and you are allowed to do this for a maximum of 3 months for Designated Employees. Voluntary Employees have to be enrolled within a month of their request or within 3 months of their last opt out, whichever is the latest (see glossary for definitions of Voluntary and Designated Employees). If you do this, you will not provide them with the Notice of Immediate Enrolment and will instead need to issue them with a Notice of Deferred Enrolment on or before their first day of employment. You must provide them with written confirmation of what is happening and when they will join, just like the Notice of Immediate Enrolment, the Notice of Deferred Enrolment will include deadlines for completion and the choice they are making. There are benefits in postponing the enrolment date as you will be able to reduce the frequency in which you enrol new members. You will be able to combine them into groups and this might be particularly helpful when you need to enrol back in Designated Employees, who have previously opted out of the pension scheme.
    • Additionally, you might want to do this if you are employing someone on a short-term contract, or if your new employee has a probationary period and you want to wait until they have reached some objectives, or milestones, in their new role before joining the scheme. 
    • The 3 month period is not contract specific, someone may have multiple contracts issued during the course of their employment but the deferral period only applies to the first 3 months with an employer. Compliance checks will be carried out by Revenue Service to ensure that employers do not rotate contracts through different companies to try to continually defer automatic enrolment. If this does happen the Revenue Service will impose penalties on those employers.
  • Do we need to issue one of the notices to our employees before our operative date?

    • If your employee is an active member of your pension scheme you won't need to give them a Notice of Enrolment. If you don't currently provide a pension or your employee isn't part of your scheme but is a Designated Employee, you will need to give them either a Notice of Enrolment or a Notice of Deferred Enrolment. Information on how to use the notices can be found on the SP1 - Notices of Enrolment and employer's obligations page.




Secondary Pensions - Employer Checklist

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