Pensions auto-enrolment: let’s get ready to enrol
A change in the law means employers are now obliged to automatically enrol certain members of their staff into pension schemes and also make financial contributions to them. Here’s a quick guide on how you can make sure you are ready to enrol as failure to do so could cost your businesses up to £50,000.
The Automatic Enrolment (AE) scheme, which was introduced in 2012 to create a retirement savings culture, applies to employees between the ages of 22 and the state pension age who earn at least £10,000 a year and have not already got a pension plan in place. Under the scheme, an employer is obliged to make a contribution of the equivalent of 1% to the worker’s earnings, which will increase to 2% from October 2017, and then to 4% from October 2018.
In addition to enrolling their staff on the scheme and making contributions, business owners also have to ensure that they inform their employees about how AE affects them and their rights. Some of the ways this information can be communicated to employees includes:
- Posters (which can be downloaded from the Pension Regulator website
- Text or email
- Online articles
- The KPMG’s Pension Communications Team’s Youtube video
The pension law is being phased in over six years from 2012. The legislation initially targeted the biggest businesses that employ more than 120,000 members of staff, but between June 2015 and April 2017 it will even be applicable to firms with fewer than 50 employees. The Pensions Regulator, which has been policing the system with the aim of ensuring that employers are enrolling their workers at the correct time, recommends that firms start planning for automatic enrolment at least 12 months before their staging date. You can also put together an action plan for automatic enrolment by visiting the Pension Regulator’s website.
Each business will have a different staging date for AE, which is based on how many of their employees were on their PAYE scheme from April 2012. Although the start dates are earlier for firms with more members of staff, a staging date can be brought forward if requested. To find out when your staging date is, please visit the Pension Regulator website (http://www.thepensionsregulator.gov.uk) and enter your PAYE reference into the staging date tool.
As part of the planning process, you will also need to nominate two contacts: the first one must be the most senior member of staff, such as a CEO or managing director, and the second one will be responsible for implementing automatic enrolment, such as a HR or pensions manager, accountant or IFA.
It is important to comply with AE legislation as failure to do so will result in statutory notices, followed by penalty notices. A civil notice of up to £5,000 for individuals and £50,000 for organisations can be issued for failures to pay contributions due to staff.
AE can be a minefield to implement and manage and so it is advisable to use an IFA who is an expert in Pensions to support you. At aible we work closely with the team at Anglo-Celtic Financial Consultants to provide our clients with the best AE support, so if you have any questions about AE or are looking to start planning for your staging date then drop me a line on 01656 630 010 or email email@example.com to see how we can help.