Pensions - Auto Enrolment
In the coming months many businesses will start to receive a letter from The Pensions Regulator reminding them of the start of Auto Enrolment for their business.
Whether a business has one employee or 1,000 employees, Auto Enrolment places significant responsibilities on an employer. Employers will need to enrol many of their employees into a work based pension scheme and pay pension contributions.
When does an employer have to start Auto Enrolment?
An employer's Auto Enrolment commencement date (generally known as the staging date) is set by reference to the number of persons in an employer's PAYE scheme on 1 April 2012. The more employees an employer had on that date, the earlier the staging date. It is irrelevant how many workers are on the payroll scheme on the staging date itself.
To find your staging date go to:
Ideally an employer should be starting to plan for Auto Enrolment around 12 months before their staging date.
How much is Auto Enrolment going to cost?
Auto Enrolment is likely to result in additional costs being borne by employers. The costs to an employer will depend on the type of workers they have in their business. The term ‘workers’ includes all employees but can sometimes include other persons.
All employers will need to contribute at least 3% on the qualifying earnings for eligible jobholders. However, to help employers adjust, compulsory contributions can be phased in, starting at 1% (if the staging date is before 30 September 2017) before eventually rising to 3%.
It would be sensible to prepare a budget so you know how much Auto Enrolment is going to cost. How much Auto Enrolment is going to cost an employer depends on the age profile of their workforce, the level of pay and how many opt in or out.
Consider who will be the pension provider
It is the employer's responsibility to have an appropriate pension scheme in place. We cannot provide advice on this as this is the province of an Independent Financial Adviser or pension consultant. However, three pension schemes have been established to cater for the employer of a small or medium sized business. These are:
> National Employment Savings Trust (NEST) > Now Pensions > The People's Pension
Ideally an employer should choose an appropriate pension scheme provider and apply to that scheme some months before the staging date.
Communicating with your workers
There are some communications that an employer, must send to their workers and these must be sent within certain time frames. In addition, employer's may also wish to consider other communications such as 'Frequently Ask Questions' or displaying notices around the workplace.
The type of communications an employer needs to send to their workers depends on a number of factors. The Pensions Regulator provides templates which can be used to provide the required information. These can be found at:
Enrolment of workers and payment of contributions
The enrolment of workers into a pension scheme and the payment of pension contributions to the scheme will require a lot of work.
Employers will need to check that their payroll processes can deal with:
> assessment of their workers every pay day to determine whether they need to be enrolled into the pension scheme > calculate employee and employer pension contributions > preparation of payment schedules for the pension scheme provider.
Registering with The Pensions Regulator and keeping records
The Pensions Regulator was established to regulate work based pensions. An employer must register with The Pensions Regulator generally within five months of the staging date.
Inevitably there are forms to complete and records to keep to comply with the requirements of Auto Enrolment. As may be expected, there are penalties for non-compliance.
Should you require any further information, then please do not hesitate to contact your usual contact at the office.
Author: James Cornthwaite FCA CTA
A former pupil at St Aidan’s C of E High School, James attended Blackpool Sixth Form College and Lancaster University, graduating in 2004, gaining BSc. first class honours. He joined Moore and Smalley, Preston in 2005 and qualified as a...
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