How Do I Set Up a Workplace Pension for My Staff

Introduction

The law requires all UK employers to automatically enrol eligible employees into a workplace pension scheme and contribute to it. This system, known as auto-enrolment, was introduced by the government to help more people save for retirement.

Even if you employ only one person, such as a personal assistant or part-time worker, you may still have pension duties. Setting up a compliant pension scheme protects your employees’ future and ensures your business avoids fines from The Pensions Regulator.

Step 1: Check when your duties start

Your legal duties begin as soon as your first employee starts work. The Pensions Regulator will write to you confirming your staging date or duties start date. From that date, you must assess your workforce, set up a pension scheme, and start making contributions.

If you already have employees, you can find your staging date by visiting The Pensions Regulator’s website and entering your PAYE reference.

Step 2: Work out who you need to enrol

Not every worker must be automatically enrolled. You must assess your staff based on age and earnings to determine who qualifies.

There are three categories of workers:

Eligible jobholders aged 22 to State Pension age and earning more than £10,000 a year. These employees must be automatically enrolled.

Non-eligible jobholders aged between 16 and 21, or State Pension age up to 74, earning between £6,240 and £10,000. They can ask to join voluntarily, and you must contribute if they do.

Entitled workers earning below £6,240. They can ask to join a pension scheme, but you do not have to contribute.

You must review your staff regularly because eligibility can change if their earnings or age change.

Step 3: Choose a pension provider

You can choose any pension scheme that meets the government’s auto-enrolment standards. Popular options include:

NEST (National Employment Savings Trust): A government-backed, low-cost scheme designed for all employers.

The People’s Pension: Widely used by small businesses and charities.

NOW: Pensions: Suitable for employers who want a simple online system.

When choosing a provider, consider:

Charges and administration costs.

How easy it is to integrate with your payroll software.

Investment options and performance.

The level of support and reporting tools offered.

Make sure the scheme is approved by The Pensions Regulator and set up in time to meet your duties start date.

Step 4: Set up payroll integration

Your payroll system must be able to calculate pension contributions automatically for each pay period. Most modern payroll software includes pension modules that handle enrolment, deductions, and reporting.

You will need to:

Add your chosen pension provider’s details to your payroll software.

Configure employee contribution rates.

Ensure the system deducts contributions automatically and submits them to the pension provider on time.

If your payroll software does not support pensions, you can upload contribution files manually through your provider’s online portal.

Step 5: Calculate contributions

Employers and employees must both contribute to the pension. As of the current rules:

Employers must pay at least 3 percent of qualifying earnings.

Employees must contribute 5 percent, which includes tax relief.

Qualifying earnings are usually between £6,240 and £50,270 per year, although your provider may calculate differently depending on the scheme type.

You can choose to pay more than the minimum if you wish to offer better benefits.

Step 6: Write to your staff

Once your pension scheme is set up, you must write to every employee within six weeks of your duties start date. These letters explain:

Whether they have been automatically enrolled or have the right to opt in or out.

How the scheme works and how much will be deducted.

How to contact the pension provider for more information.

Most pension providers offer letter templates you can personalise for your staff.

Step 7: Make regular contributions

After enrolment, you must deduct pension contributions from each employee’s pay and add your employer contributions. Payments should be sent to your pension provider promptly, usually within a few days of each payroll run.

Missing or late payments can result in penalties and affect your employees’ retirement savings, so always make contributions on time.

Step 8: Keep accurate records

You must keep detailed records for at least six years, including:

Names and addresses of enrolled employees.

Dates of enrolment, opt-outs, or re-enrolment.

Pension contribution amounts and payment dates.

Copies of all employee communications.

Good record-keeping makes re-enrolment and reporting much easier and ensures compliance with The Pensions Regulator.

Step 9: Complete your declaration of compliance

Once you have set up your pension scheme and enrolled eligible employees, you must complete a declaration of compliance with The Pensions Regulator.

This confirms you have met your legal duties. You must submit it within five months of your duties start date. Failure to do so can result in fines.

Step 10: Re-enrol every three years

Every three years, you must reassess your staff and re-enrol anyone who previously opted out but now qualifies. You will also need to submit a new declaration of compliance after re-enrolment.

Re-enrolment ensures employees have regular opportunities to start saving for retirement.

Common mistakes to avoid

Missing your staging date or failing to complete your declaration.

Choosing a pension provider that does not integrate with your payroll system.

Forgetting to assess new employees or those whose earnings change.

Paying contributions late or using incorrect earnings figures.

Not informing employees about their rights or enrolment status.

Avoiding these mistakes keeps your pension scheme compliant and protects your organisation from fines or enforcement action.

Conclusion

Setting up a workplace pension is a legal obligation, but it is also a valuable benefit that supports your employees’ financial wellbeing. By choosing a compliant pension provider, setting up your payroll correctly, and keeping accurate records, you can meet your auto-enrolment duties with confidence.

Once in place, your pension scheme runs largely automatically, requiring only regular reviews and contributions. With good planning and communication, your charity or business can meet its responsibilities and help staff build a secure retirement.