Khan Thornton’s guide to auto-enrolment and work pensions
The Pensions Regulator issues regular warnings that, whilst awareness of the new auto-enrolment regulations and workplace pension issue is high among UK businesses, a great percentage of them are not moving fast enough to comply with the set deadlines.
Auto-enrolment is the latest government-led solution to the problem of not enough people making provisions for their pension. It was originally set up as part of the Pensions Act 2008, according to which eligible workers would be enrolled into a workplace pension scheme: both employer and employee pay into it. Currently, it is compulsory for the employer to provide such scheme for their eligible employees, but not for the latter to stay in the scheme (they can opt out at any time).
The onus firmly rests with employers, who face stiff penalties if they do not comply.
Auto-enrolment processes started in 2012; the largest companies were affected first, with compliance deadlines trickling down to smaller companies since then.
Medium-sized companies (those with 50-53 employees) will have staged (i.e. shown that they are ready and their employees are enrolled) by 1 April 2015.
Small and micro businesses had to start enrolling their staff by 1 June 2015.
Over the next year or two, over one million companies will have to auto-enroll their workforce.
Awareness and preparation:
Almost 80% of small and micro businesses seek help from their business advisers and accountants. The problem is that generic accountants are not, sometimes, best placed to give the right kind of advice; hundreds of fines have already been issued to companies for failing to comply with the new regulations.
Good sources of information about this issue are The Pensions Regulator, the Department of Work & Pensions and the Money Advice Service.
A company’s “staging date” is the date by which qualifying companies must enrol their (qualifying) employees into the pension scheme that has already been set up for that particular company by the employer.
The staging date is determined by the number of (qualifying) employees the company had as of April 1 2012.
Pension Scheme’s suitability:
The most important question, after a company has set up or has a pension scheme in place already, is whether that scheme counts for auto-enrolment purposes. With everybody trying to find the appropriate pension scheme, time could be of the essence, and processes much slower.
This can be a lengthy, complicated and specialist process, which neither in-house book-keepers or generic accountants may be able to manage properly. As The Pensions Regulator frequently points out, high awareness of the changes does not automatically mean that companies are ready for them; expert advice saves time, hassle and – ultimately – money.
Once the scheme is in place, qualifying employees must be kept informed of the process and the pension scheme chosen. These communications, again, are compulsory and must be handled carefully. Employees must be able to manage their opt-in or out choices, but cannot do so unless appropriately advised by their employer.
After the process is complete, and the employees are enrolled into an appropriate pension scheme, the employer can submit a declaration of compliance to The Pensions Regulator. There is a deadline for this stage too, which is 5 months from the initial staging date. Failure to comply by submitting the declaration may attract a fine.
Contribution calculations must be approved and monies secured in the pension fund.
Hundreds of £400 fines have already been issued. Fines can, however, go up to £10,000; even imprisonment is a possibility. Awareness of what attracts a fine is vital; reasons range from missing one’s staging date to failing to submit the appropriate declaration by the five-month deadline.