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Company directors and auto enrolment

11th Oct 2016

Auto enrolment is becoming a reality for small business owners, but there’s still a lot of confusion around which companies need to have a pension in place. This is especially true among employers where the staff is made up of one, two or a few directors.

In a recent update to the workplace pension legislation The Pensions Regulator (TPR) decided that company directors no longer need to join a workplace pension scheme.  This applies to all directors and to companies that have only directors, as well as those with directors and employees.

The rules only apply to directors appointed under the Companies Act 2006 and not to anyone with the job title of director.

TPR says that for directors classed as workers (ie those with a contract of employment) it will be at the employers discretion as to whether or not the directors should join a pension scheme.

Director-only companies will continue to get letters from TPR and have a staging date.  This is because directors can choose to set up a join a scheme if they want to.  So if you decide not to enrol your directors you still have duties and you must fill out your declaration of compliance to say that you have no eligible workers to enrol at the staging date.

If your company also employs workers then a pension scheme may need to be put in place.

Exempt director-only companies should get a letter from TPR to say they have no auto enrolment duties. If you’ve been given a staging date and you’re certain that you’re exempt from auto enrolment duties because you’re a sole director or there is one or more directors who don’t have a contract of employment, you must tell TPR that you’re exempt by filling in the form online.

Once you’ve done that you’ve done your bit and can now forget about auto-enrolment, unless, of course, your circumstances change. If you take on a new member of staff who isn’t a director you may need to set up a pension scheme.

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