When and how employers can use postponement under the new pensions legislation.
Auto-enrolment will make it compulsory for all employers to automatically enrol eligible jobholders into a pension scheme and to make contributions into that scheme. Large employers have already started automatically enrolling staff into a pension scheme and by the beginning of 2018 all employers will be required by law to follow suit.
The deadline for implementing this is known as the ‘staging date’ and these dates can be found on The Pensions Regulator’s website.
Postponement allows an employer to choose to postpone automatic enrolment for a period of their choice of up to three months. To use postponement the employer must issue the workers with a postponement notice. The deadline for issuing the postponement notice is one month following the day after the date from which they wish to use postponement. If the notice is not issued, postponement cannot be applied.
Essentially, postponement is the postponement of the assessment of the worker and therefore a postponement of whichever employer duty may apply, depending on the category of worker. The assessment is postponed until a date of the employer’s choosing known as the ‘deferral date’.
An employer can choose to use postponement on certain dates. These are:
- their staging date, in respect of any workers employed on their staging date
- the first day of employment, in respect of any worker starting employment after the employer’s staging date
- the date a worker employed by them meets the criteria to be an eligible jobholder after the employer’s staging date.
An employer can also use postponement where they have applied the transitional period for defined benefit and hybrid pension schemes to a worker. The postponement notice tells a worker:
- that automatic enrolment has been postponed
- the deferral date, and
- that on the deferral date, if they meet the criteria to be an eligible jobholder, they will be automatically enrolled.
The postponement notice can also be used to include some of the other information requirements an employer is required to fulfil in respect of a worker, such as:
- to tell a jobholder about their right to opt in to an automatic enrolment scheme
- to tell an entitled worker about their right to join a pension scheme
- to tell a jobholder who is an active member of a qualifying scheme about the scheme.
To be valid the postponement notice must be provided in writing. This can include information sent by email, but does not include merely signposting to an internet or intranet site or displaying a poster in the workplace. The notice must be provided by no later than one month after:
- the employer’s staging date, if they are choosing to use postponement on their staging date in respect of any workers employed on their staging date
- the first day of employment, if they are choosing to use postponement on the first day of employment in respect of any worker starting employment after the employer’s staging date.
It can be issued ahead of the staging date or worker’s first day of employment.
Postponement allows employers some flexibility such as in the following circumstances:
- smooth the process of staging, eg automatically enrol groups of workers at different points in the three-month period
- align automatic enrolment with their existing payroll processes, eg to avoid calculation of contributions on part-period earnings, or to maximise the amount of the opt-out period that falls before payroll is run
- smooth the process of the automatic enrolment duty in respect of workers with rare spikes in earnings
- smooth the process of the automatic enrolment duty in respect of short-term workers who leave soon after starting work, or workers who trigger automatic enrolment just before ceasing employment
- facilitate contractual joining into a salary sacrifice arrangement
- smooth the process of fulfilling the information requirements, eg use the postponement notice to fulfil a number of the different information duties for a worker in one go.
An employer can choose to use postponement in respect of one worker, some workers or the whole workforce.
Further information can be found on ACCA’s Technical Advisory webpages and in this ACCA podcast.
Article contributed by ACCA