Pensions - who and what? - Abbeygate Accountancy

Pensions - who and what?

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Employer pensions… what does it actually mean, who does it affect?

When people say “employer pensions” they usually mean workplace pensions and the auto enrolment rules.

In plain English: If you employ people, there's a very good chance you have to put them into a pension and pay money in. It’s not optional, it’s a legal duty (for most employers with staff).

The rules

1) Who has to do this?

If you employ “workers”, you have workplace pension duties, these are the law.

Director only companies

If you are the sole director and have no staff, you generally do not have auto enrolment duties.
Once you employ staff (even 1), duties can kick in.

2) Who must be auto enrolled?

You the employer must auto enrol someone if they meet the key tests:

They’re a worker
Aged 22 to State Pension Age
Earn at least £10,000 a year (the “earnings trigger”)
Work in the UK

People who do not meet that full test might still have rights to opt in or join a scheme (and in some cases you still have to contribute).

What you have to pay (minimums)

Minimum contributions

For a standard auto enrolment setup using “qualifying earnings”:

Minimum total = 8%
Minimum employer = 3%
The employee typically makes up the balance of 5%

Qualifying earnings – what does this mean?

If you use qualifying earnings, the contributions are usually calculated only on earnings between:

£6,240 and £50,270 for 2025/26 – so the first £520 per month is not pensionable!

Key admin duties (the stuff that causes fines)

You need to:

Put the right people in, and on time
Write to staff (email) and tell them what’s happening
Pay contributions over, on time (normally a couple of weeks after pay day)
Keep records and an audit trail
Do re-enrolment (normally every 3 years) – so put everyone back in the pension every 3 years, for which they need to opt out, if they so wish.
Submit your declaration of compliance when required

Common mistakes we see (and fix)

Thinking “it’s only 1 employee, so it doesn’t count”
Using the wrong scheme type to make deductions from employees – that get s complicated
Late payments to the pension provider
Not doing letters and records properly
Director only rules misunderstood
Salary sacrifice done casually and payroll gets messy