Auto Enrolment: Is your business ready?
What is Auto Enrolment and why do you need to know about it?
Auto Enrolment is a government scheme that is aiming to get more people in the UK saving for their retirement. The scheme means that most UK employers will be obligated by law to offer a workplace pension scheme and make a contribution to their employees’ pensions every pay period.
When you need to have your workplace pension scheme set up will depend on the size of your company and your PAYE Reference Number.
About 12 months before your staging date you will receive a letter notifying you of the exact date. If you would like to find out your staging date in advance then you can visit the Pensions Regulator website and enter your PAYE code.
If you do not pay your employees through a PAYE scheme, then your staging date will automatically be 1st April 2017.
What will happen if I don’t comply with my staging date?
It is important that you do not ignore your staging date; failure to comply could result in penalties. The Pensions Regulator has a number of different ways to enforce employers to comply with the auto enrolment legislations. These range from informal warnings to fixed penalties.
The longer you leave it after you staging date to set up a workplace pension, the bigger the repercussions.
Auto Enrolment – They Key Facts
• Any worker earning over £10,000 per annum will need to be automatically enrolled into a workplace pension by their employer
• The Pensions Regulator recommends 12-18 months for preparation and implementation
• 1.8 million employers are due to reach their staging date by 2018*
• 26% of small businesses do not know their staging dates**
• 5.4 million people have been placed in workplace pension schemes since 2012***
What do you need to do?
1. Find out your staging date
Your staging date is the date when you need to have a qualifying auto enrolment scheme in place to comply with government legislature. Whilst you will receive a letter 12 months prior to your staging date, you can confirm your date on the Pension Regulator website. The further in advance you start planning the more options you will have available to you.
2. Assess your employees eligibility
You do not necessarily need to auto enrol all of your employees in a workplace pension scheme, which is why it is important to be aware which of your employees are eligible and those who are not.
Employees will be eligible if they:
• Earn over £10,000 a year (or £833 a month or £192 a week)
• Aged 22 or over
• Under the State Pension age
• Work in the UK
3. Check your current pension supplier
It’s a common misconception amongst businesses that if they already have a pension supplier that this supplier will be compliant with the auto enrolment legislature. In reality many schemes do not comply with the new regulations, which means it is essential to check that your pension supplier is auto enrolment compliant and that it is suitable for the ongoing administration required for auto enrolment.
4. Select the auto enrolment scheme
If your current pension scheme is not compliant with auto enrolment legislation, then you will need to select a new scheme that is. Selecting a work place scheme is not a simple process so it may help to use the services offered by a financial adviser such as KDW. Important points to consider when selecting a scheme are:
- Is there a set up fee and if so what does it include?
- Will the selected scheme be compatible with your payroll software?
- Does the scheme support you with employee communications?
- What support do they offer?
- Do they help you with assessing your employees?
- Do they provide members of the scheme with complex investment choices?
5. Communicate the changes to your employees
It can be easy to get wrapped up in the administrative process however the introduction of a workplace pension will have an impact on your employees. You are legally obliged to keep them informed throughout the process, educating your employees on the scheme, the relevant dates and the contribution that they are required to make.
6. Enrol your employees
Once you have selected your scheme and informed employees of the upcoming changes then it is time to actually enrol them onto the scheme.
If they choose to opt-out then they must complete an opt-out form. If the employee decides to opt-out within a month of being enrolled, then any payments made into the scheme will be refunded. However if they choose to opt-out after the first month, then any contributions will stay in their pension pot until they retire. Employees are able to re-join the scheme at a later date and must be re-enrolled back into the scheme every three years, in accordance with auto enrolment legislation.
7. Submit the Declaration of Compliance
You are required to submit your auto enrolment Declaration of Compliance to the Pensions Regulator within 5 months of your staging date. In doing so the Pensions Regulator is made aware that your business has complied with the duties required for auto enrolment.
You will be required to submit a re-declaration every three years to show the Pensions Regulator that you are continuing to comply with the re-enrolment duties.
8. Make contributions to your employees’ pensions
It’s an obligatory part of the auto enrolment legislation to contribute to your employees’ workplace pension. The minimum amount that you must contribute is 1% until 5th April 2018, after that it will rise to 2% before finally rising to 3% on 6th April 2019.
9. Assess the impact on your workforce
The introduction of an auto enrolment scheme is likely to impact upon your HR and payroll functionality. We recommend ensuring that the people responsible have the capacity to take on the additional work load. If they don’t it may be worth considering a new member of staff or a reallocation of work amongst your team.
10. Ongoing management of the auto-enrolment process
You will need to ensure that your payroll systems and processes are prepared to adapt to planned changes, such as the increase of employer and employee contributions. Other things to consider with regards to the ongoing management are:
- Keeping up to date records on employees, which covers who is enrolled and when, the contributions that they are paying and any other information about their pension
- Providing information to the pensions regulator as and when required
- Any change to contributions will need to be communicated to employees in a timely manner
- Monitoring changes in staff’s ages, as staff will become eligible once they reach their 22nd birthday
- Enrolling new staff members
How can KDW help?
We are specialists in workplace pensions and have experience in setting up auto enrolment schemes for businesses of varying sizes and functions. We will undertake a review of your company assessing your employees and existing payroll to ensure we select a compliant pension scheme that works effectively for your business.
Your adviser will support you throughout the process, assisting with implementation, employee communications and compliance monitoring.
As Independent Financial Planners, we are also able to provide further advice on retirement planning and personal pensions. If you would like to discuss auto enrolment then please do not hesitate to contact us. We offer a free initial consultation, where we will discuss your business and the advisory services that we provide.
Contact us:
T: 01727 85 22 99
E: pensions@kdw.co.uk
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