The Federation of Small Businesses reported last week that more than 60% of UK SME employers are unaware of the auto-enrolment requirements for their business, so we thought that it was about time we answered some of your questions and gave you a quick and easy guide to what you need to know and do…
When does this come into force?
For larger organisations, auto-enrolment has been in place now since October 2012. Staging dates are rolled out according to the size of your business (number of employees, on 1 April 2012), and by your payroll reference. In reality this means that for organisations with fewer than 2000 employees, you will need to be fully compliant with auto-enrolment between 1st Sept 2013 and 1st April 2017. The vast majority of businesses (61 to 499 employees) will be caught up with auto-enrolment between 1 January 2014 and 1 August 2014. For the smallest of businesses, with fewer than 30 employees, your staging date will start from 1st January 2016, your exact date being determined by the last 2 digits of your PAYE reference. Your scheme must be registered within 4 months of your staging date. If you are unsure of your date, please contact any of the team at CFP who will be happy to help you.
When do I need to act?
In a word, NOW. Regardless of the size of your business and whether you already have a pension scheme in place (see below), or are thinking of setting one up for the first time in order to comply with this legislation, it is essential that you act now to fully understand your obligations and put the right solution in place on time.
So, what do I need to do?
Your first step is to contact your Cullens advisor, who will review your current situation and your existing scheme, if you have one, and then talk through what needs to happen next, either to make your existing scheme compliant or to set you up with the most appropriate solution to fit your needs.
I already have a pension scheme in place – so can I just ignore this?
No! Unfortunately not. Not all pension schemes are compliant with the new legislation. And even those that are will need to be reviewed to ensure that all employees who are eligible for the scheme are enrolled, and that the correct systems and processes are in place to ensure that any movements in payroll or other changes in circumstance are taken into account so that newly eligible employees are correctly ‘processed’ and automatically enrolled into the scheme.
So what is the process?
There is a huge amount of administration involved, from identifying and selecting the most appropriate scheme(s) for your business and your employees, registering your scheme(s) with The Pensions Regulator, communicating appropriately with your employees, dealing with compliance issues, identifying which employees are eligible and which are not, automatically enrolling those who are and who do not wish to opt out, as well as enrolling those who are not eligible but who choose to opt in, managing and notifying any changes – movers, leavers and so on; right through to administering the scheme, renewing your registration and retaining compliant records of all contributions for six years.
So, who is eligible?
Essentially, most of your employees will probably be eligible. If they are over 22 years of age, below state pension age and earning more than £9,440 per annum they will qualify for auto-enrolment. Likewise, any other employees earning more than £5,668 and aged between 16-75 can request to opt in and, if they make a request, you will have to make contributions for them. Again, please do contact us for more details about eligibility.
Can I do this myself?
Absolutely you can, as long as you are aware of your obligations with regards to compliance, administration and the ongoing paperwork. Please do contact Karen Robinson at firstname.lastname@example.org who will be happy to talk you through the process and the commitment involved.
If you would like the peace of mind of knowing that all of the compliance and governance has been taken care of, from registering your business with the Pensions Regulator and ensuring your scheme is compliant with the rules and regulations of auto enrolment, to keeping you updated on any changes to these, then contact one of the team of experts at Cullens (led by Karen) to discuss how we can help you implement the best solution for your individual business requirements.
But none of my employees want to be enrolled in a pension scheme – do I need to do anything?
It is estimated that 37% of employees will choose to opt out of auto-enrolment. In our experience, employees often wish to opt out as they are simply unaware of the benefits to them of a well managed scheme. However, a great corporate pension scheme could, indeed should, play an important role in your employee engagement strategy, potentially generating a significant return on investment!
Regardless of whether your employees choose to opt in or not, you still have an obligation to auto-enrol them. An employee cannot commence an opt out process until they have been enrolled into a scheme. Therefore, not only should you have a scheme set up, but also you should ensure that employees have received and understood all information and documents regarding the implications of and benefits to joining the scheme, and to have processed all the correct paperwork in the right time frame for those who ultimately do decide to opt out. And remember you still have an obligation to revisit this and automatically re-enrol them every three years!
How much will this cost?
Employer contribution levels vary by date and your employees’ pensionable earnings, up to a maximum of 4% of gross income for you as the employer, and 5% gross for your employees. Please contact us for further details.
By properly planning and budgeting for auto-enrolment well in advance of your staging date we can help you minimise the impact on and disruption to your business.
Should you wish us to project manage and facilitate the implementation of your compliant workplace pension scheme, then we will be happy to review your existing scheme(s) and implement the best possible solution for you, as well as to take care of all the necessary corporate governance requirements. We will work with you and agree a fee for this work based on the complexity of your project for your own individual needs
What happens if I don’t act?
Simple. You will be fined. The size of the fine will be dependent on the size of your business,
but the worst case scenario this could be up to £10,000 per day!! Don’t let that happen to you.