Auto Enrolment Pension Rules for Single Director Limited Company

Auto Enrolment Pension Rules for Single Director Limited Company.

Auto enrolment rules for smaller companies are looming on the horizon.  2015 and 2016 sees the new pension regulations starting to affect smaller companies.

Auto-enrolment or workplace pensions is the Government’s answer to getting us all to save in a pension scheme by making it law that all employers must offer a pension scheme at work and both employees and employers will be required to pay into the pension scheme.

The staging dates for smaller employers now start start in August as follows:

• 30 to 49 Employees: 01/08/2015 – 01/10/2015

• Less than 30 Employees: 01/01/2016 – 01/04/2017

• New Employer Start-ups (Between 2012 and 2017): have between April 2017 and February 2018 to set up auto enrolment.

To start with, the employer must set up a scheme within dates already set by the Government and then both the employer and employee must pay into the scheme.  The contribution rates are as follows with increases in payments pushed back until April 2018 onwards (originally they were set to increase earlier:

• October 2012 to 5th April 2018 - total minimum pension contribution of 2% of qualifying earnings with at least 1% from the employer i.e.  the employee may have to pay in 1% too.
• 6th April 2018 to 5th April 2019 - total minimum pension contribution of 5% of qualifying earnings, with at least 2% from the employer i.e.  the employee may have to pay in 3% too.
• From 6th April 2019, total minimum pension contribution of 8% of qualifying earnings, with at least 3% from the employer i.e.  the employee may have to pay in 5% too (meaning employees paying 4% plus 1% tax relief = 5%).
• All employees must be automatically enrolled in the pension scheme but you do have the option to “opt out” i.e.  by default employees are in but they can elect to not be in the pension scheme.

What about Single ‘Employee’ Director/Owner Manager Companies?

The simple answer is single ‘employee’ companies are exempt from auto-enrolment.  However, the Pensions Regulator, responsible for enforcing the new pension laws will not know that you are a single person firm or company.

You must therefore write to the Pensions Regulator that your limited company is exempt.  In your letter you must include various details about your company and the reasons your believe you are exempt from offering a workplace auto-enrolment pension scheme.

Free Letter Template to Pensions Regulator

We have produced a template letter that we can email to you to use if you are a single employee/sole director firm with no employees.  Contact us and we will send you a copy by email to send to the Pensions Regulator.