Is Your Business Ready for the New Laws on Pensions Auto-Enrolment?
What is pensions auto-enrolment?
The law on workplace pensions has changed. Every employer with at least one member of staff now has new duties, including enrolling those who are eligible into a workplace pension scheme and contributing towards it.
This is called ‘automatic enrolment’ because it is automatic for staff – they don’t have to do anything to be enrolled into a pension scheme, but it is not automatic for employers.
Every employer in the UK must comply with this new legislation by their individual ‘staging date’. Staging dates depend on how many people you employ and when your business was set up.
If you have at least one member of staff who is paid via a PAYE scheme, automatic enrolment duties apply.
In summary, this means that by your ‘staging date’, you must have a qualifying pension scheme in place and enrol all your eligible employees in it.
You then have an ongoing requirement to comply with the law and must be able to evidence that you are doing so.
Let’s take a look at some of this in a little more detail:
As an employer, what do you have to do?
In order to comply with the new workplace pension rules, there are eight key steps:
1. Know your staging date – when you need to have your pension scheme fully set up.
2. Get some advice – make sure you know the rules and regulations and you have a plan.
3. Assess your workforce – know who you need to enrol into a pension (eligible workers).
4. Review your existing pension scheme – is your current workplace scheme suitable or not?
5. Communicate with your staff – let them know what is happening and when.
6. Register your scheme – ensure the Pensions Regulator is informed and you record details.
7. Automatically enrol your staff – ensure all eligible staff are enrolled into the new pension.
8. Contribute to your scheme – all employers will need to make pension contributions.
As an employee, what do you have to do?
Not much. The whole point of automatic enrolment is that you will be enrolled into a workplace pension scheme automatically. You may opt out should you wish, but you should consider this carefully as you could lose benefits. Many workplace pension schemes will allow you to make additional pension contributions and some employers may even match your contributions. If you are unclear about anything to do with your workplace pension, speak to your employer in the first instance.
What is my staging date?
This is a date specific to your business. For most firms, it will be before 2017. To check for yourself, find your employer PAYE reference and check your staging date online or speak to us and we can find your staging date for you.
What is a qualifying pension?
Broadly speaking this is a pension scheme that does not have anything in the rules that creates a barrier to auto-enrolment. So for example, there must be a default investment fund for members. This could be an existing employer pension scheme or a new one.
What is an eligible employee?
There is a range of qualifying criteria and is a little complicated. If an employee is aged between 22 and the state pension age and earns in excess of £192 gross per month, they must be auto-enrolled. Employees of other ages and earning levels may need to have the option to join.
What ongoing compliance requirements will I have?
You must keep full records of your auto-enrolment activities including who you have enrolled and what contributions you have paid for 6 years. You must monitor staff to see who else becomes an eligible jobholder. Communicate with employees, enrol them when necessary and pay the right level of contribution.
Full details of all your obligations are available from The Pensions Regulator.
What happens if I don’t comply?
As a business owner, if you fail to comply with the new laws on workplace pensions, you’ll first get a warning letter from the Pensions Regulator.
Following this, a £400 fine could be issued. Continuing not to offer automatic enrolment into a pension scheme could lead to fines of anywhere between £50 and £10,000 per day.
Where can I get more help and information?
At NorthStar Wealth Management, we are experts in providing workplace pension advice so please speak to us if you need any help, information or advice.
As a team of fully independent, chartered financial planners, based in Southampton, we can provide the expertise and practical solutions you need.
We can show you how to set up a scheme with no ongoing cost to you, the employer.
If you would like to talk through your options or just get more information on workplace pensions and auto-enrolment, please get in touch to arrange a free consultation to discuss your situation.