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Introduction to auto-enrolment for business advisers

New pensions regulations came into force on 1 October 2012 that mean every employer with at least one member of staff has a duty to enrol eligible employees into a workplace pension scheme and contribute towards it.

The new duties were rolled out to the largest employers first and now apply to all UK employers. New employers employing staff for the first time will have legal duties for automatic enrolment on the day their first member of staff starts work.

Most small and micro employers seek initial help from a business adviser in preparing for their automatic enrolment duties. A smaller number of employers subsequently pay for external support to help them comply with ongoing duties.

What does this mean for practitioners?

The new workplace pensions regime provides an opportunity for you to provide your clients with new commercial services and enhance existing levels of client care. However, it is important to consider the associated risks and responsibilities before making any decision on offering new services.

Even if you decide not to provide services related to auto-enrolment the new regime may still have an impact if you become aware that your clients have breached their employer auto-enrolment duties. In these circumstances you would need to consider what actions should be taken to comply with ethical requirements and the anti-money laundering regime. For the latest information on the subject, please contact the Technical Advisory Services helpline

Helping your clients

The Pensions Regulator has prepared a step-by-step guide which shows how you can help your clients with their automatic enrolment duties.

  1. Duties for new employers
  2. Acting as a point of contact
  3. Checking who needs to enrol
  4. Work out your client's costs
  5. Checking records and payroll process
  6. Choosing a pension scheme
  7. Assessing and enrolling your client's staff
  8. Writing to your client's staff
  9. Knowing your client's ongoing duties
  10. Completing the declaration of compliance
  11. Re-enrolment

Questions and answers

Are your clients employing someone for the first time?

The date your client starts to have automatic enrolment duties will depend on when they first became an employer. If your client becomes an employer for the first time on or after 1 October 2017, they will immediately have auto enrolment duties for their new member(s) of staff.

If you have clients who’ve just started employing someone, they can use the Pensions Regulator (TPR)'s new online tool which will help them work out what their legal duties are, what they have to do to comply with them, and by when:

Updated information on new employer duties and example letters being sent to new employers are available in TPR's Business advisers section: 

TPR have also produced a short Automatic enrolment for new employers video to help employers understand what they need to do.

TPR recommends that employers nominate a contact, as their research indicates that employers who nominate a contact are more likely to comply with their duties and less likely to be fined. Nominating a contact also means that The Pension Regulator can write to your clients with helpful auto enrolment reminders. 

New employers risk a fine if they do not comply with the law on time. If your client has missed their automatic enrolment duties start date, then what they’ll need to do will depend on how late they are in setting up their scheme and putting staff into it. If they are more than six weeks past their duties start date, they will need to backdate any contributions they’ve missed. The Pensions Regulator has information and guidance on what to do if clients have missed their duties start date.

Are your clients employing temporary or seasonal staff?

If your clients are planning to take on seasonal or temporary staff, or have staff whose pay and hours fluctuate, they will have automatic enrolment duties for these staff. They must assess them individually every time they pay them. This includes staff who work for them for a few days, a few weeks or several months. 

If your clients know that any of their staff will be working for them for less than three months, then they may choose to use postponement. Postponement allows your client to delay the assessment or enrolment of a worker for up to three months. They can postpone as many or as few staff as they like and the postponement period can vary across their staff.  However, note that staff can also choose to opt in to their employer’s pension scheme during the postponement period.

If your client chooses to postpone from the date their legal duties started, they still have duties. This includes writing to tell staff they’re postponing automatic enrolment for them within six weeks of their staging date or duties start date. A sample postponement letter is available from the Pensions Regulator.

Are your clients expecting you to complete a Declaration of Compliance on their behalf?

Make sure you know if your clients are expecting you to complete and submit a Declaration of Compliance on their behalf.

Employers need to complete a declaration of compliance within five months of their staging date (or duties start date) to tell The Pensions Regulator how they have met their automatic enrolment duties – whether they had anyone to put into a pension or not. Employers who were late declaring their compliance have told the Regulator that they thought that this task was being done by someone else – either by their pension provider or their business adviser.

Help your clients to avoid a fine – make sure the declaration of compliance is completed and submitted on time. The Pensions Regulator has a Declaration of compliance checklist on their website to help.

Companies with no staff – what action to take?

Companies with no staff other than directors may not have any automatic enrolment duties.

If you have clients who do not have staff and who receive a letter from The Pensions Regulator, you can advise them to get in touch with the regulator in writing to explain their particular circumstances.

There is information on the regulator’s website on what sole directors can do if they believe  automatic enrolment duties do not apply to them, as well as further information to help husband and wife companies and family businesses understand how automatic enrolment duties apply to them.

Do you know how to advise your client if they may have been prey to a pension scammer?

In a January 2018 High Court case, four people who ran a series of scam pension schemes were ordered to pay back £13.7 million taken from their victims. Over two hundred members of the public were persuaded via cold-calling and similar techniques to transfer their pension savings into one of 11 scam schemes operated by Friendly Pensions Limited (FPL).
Scammers are often plausible individuals, but there are common danger signs to look out for to avoid falling victim to a scam. The Pensions Regulator (TPR) have advised that business advisers can help keep clients safe from scams by making them aware of the danger signs to look out for, which include:

  1. If you think you’ve been scammed, act immediately 
    - Contact your pension provider first to see if you can stop the transfer taking place. 
    - Then contact Pensions Wise to discuss your options.
    - Then contact Action Fraud to report the scam.
  2. Cold called about your pension? Hang up.
  3. Beware of investment deals that just seem too good to be true.
  4. Make sure your adviser is regulated by the FCA.
  5. Don’t take recommendations from a friend – check everything yourself.
Do you know how to ensure your clients payroll systems are ready?

Research by The Pensions Regulator indicates that business advisers may not be aware of  the impact that automatic enrolment has on payroll, particularly in relation to data/software compatibility.

If the payroll systems that your clients use are ready for automatic enrolment are compatible with other systems, they’ll find the process much easier to implement and run on an ongoing basis.

The Pensions Regulator has produced 'A quick guide to setting up payroll: Making automatic enrolment easier' which is aimed at business advisers and payroll professionals and which will help you understand the steps required to ensure your clients payroll systems are ready.

Do you know what your clients need to communicate to their staff?

Within six weeks of the date that automatic enrolment duties begin (staging date), employers are required to tell their staff how automatic enrolment applies to them as individuals.

Your clients may ask if you are able to help them with this task. Do you know what needs to be done and what support is available from The Pensions Regulator?

Do your clients employ a carer or personal assistant?

All employers are legally required to automatically enrol certain staff into a pension scheme and make contributions. This includes those who directly employ one or more people to provide care or personal assistance.

The Pensions Regulator has specific information and guidance for those that employ personal assistants and carers:

Do your clients run single-director or director-only companies?

In some cases, directors may be exempt from duties under automatic enrolment, even if they have an employment contract. If an employer receives a letter from the Pensions Regulator and the employer thinks they are exempt, they should let the Pensions Regulator know.

The Pensions Regulator has published a series of Most popular questions - For directors which tackle some of the most commonly asked questions, including clarification on the position of directors without a written contract of employment.

Does COVID-19 impact auto-enrolment?

Your clients' automatic enrolment duties continue to apply as normal, including re-enrolment and re-declaration duties and paying contributions.

The Pensions Regulator has produced COVID-19 guidance for employers:

The Regulator has also launched a campaign targeting employers with the key message that an employer's automatic enrolment duties remain unchanged.

Have your clients received a letter from The Pensions Regulator?

The Pensions Regulator has written to every employer in the UK to tell them the date at which they need to be ready to enrol their eligible staff into a workplace pension. The employer was also asked to nominate a business contact and additional contact, to whom the Pensions Regulator will send updates in the run up to the date at which employer duties begin.

Business contact: This is the most senior responsible person at the employer, or the business owner, who is legally responsible for ensuring compliance with the automatic enrolment duties. In a small business, this is likely to be the business owner.  

Additional contact: If someone else manages the day-to-day tasks of automatic enrolment on your behalf (e.g. an accountant, payroll provider or other business adviser) you can confirm that person as your ‘additional contact’.

How can you help your clients choose the right pension scheme for their staff?

ICAEW has produced a helpsheet setting out the factors which we would expect our members to consider when assessing whether a pension scheme is appropriate, covering: governance and sustainability, compatibility with payroll software, costs and charges, discrimination tax relief and generating letters for staff.

The Pensions Regulator (TPR)  have also produced guidance on what to look for when choosing a pension scheme, including what tax relief method may be appropriate:

Is your client a Limited Liability Partnership (LLP)?

Following the Supreme Court's decision in Clyde & Co LLP and another v Bates van Winkelhof [2014], it seemed that a member of a LLP might count as a worker under the Employment Rights Act (ERA) 1996.

However, from 6 April 2016 if someone is genuinely a partner, there is only a discretion rather than an obligation to auto-enrol them, by virtue of Regulation 5EB of The Occupational and Personal Pension Schemes (Automatic Enrolment) Regulations 2010 (as amended by The Occupational and Personal Pension Schemes (Automatic Enrolment) (Miscellaneous Amendments) Regulations 2016). LLPs need to apply HMRC’s Salaried Members Rules to identify those members who are more like employees than partners in a traditional partnership in order to ascertain whether their duty is discretionary.

Re-enrolment: are your clients aware of their ongoing duties?

Part of an employer’s ongoing duties includes the requirement to re-enrol every three years. This is when those staff who either opted out of their workplace pension scheme or ceased to be members need to be reassessed, and re-enrolled into a workplace pension scheme if they meet certain criteria. Employers will need to write to the staff this applies to, to tell them what has been done, and they’ll also need to re-declare their compliance to The Pensions Regulator (TPR).

Your clients need to complete and submit their re-declaration on time or they run the risk of a fine. Make sure your clients know what they need to do to meet their ongoing duties and that their records are up to date.

The Pensions Regulator carries out regular spot checks in towns and cities across the UK to ensure employers are complying with their automatic enrolment duties. In the coming months, TPR will be conducting more spot checks and will help employers with their duties or take further action as appropriate.

Employers have a number of other ongoing AE responsibilities too, including monitoring the ages and earnings of their staff and keeping records. They are also responsible for ensuring regular contributions are made to their staff’s pension.

What happens if my client doesn't comply or is late complying?

The responsibility for complying with their employer duties rests with your clients. If your clients ignore their duties they may face enforcement action. 

The Pensions Regulator (TPR) carries out spot checks on employers across the UK to make sure they are complying with their workplace pensions duties. Pension providers also help to identify non-compliance, as if an employer sets up a scheme but never pays into it, TPR can be notified. If enforcement action is warranted, TPR can send Unpaid Contribution Notices (UCNs), requiring all backdated contributions to be paid within 28 days. 

Keeping up to date

Updates from the ICAEW and the Pensions Regulator on auto-enrolment are available from our guidance and support page. 

ICAEW and the Pensions Regulator offer a range of courses, Q&A sessions and webinars on auto-enrolment. Details of upcoming events and past webinar recordings can be found on our auto-enrolment events page.

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