Auto Enrolment Pensions

For businesses with 500 employees or less, automatic enrolment for workplace pensions is now very real and there are a number of things you will have to do over the coming months to ensure that you comply with this new legislation – or face being fined by the Regulator.

The auto-enrolment process is highly complex. Firms will need to implement a scheme by a particular date, called their “staging date” which is determined by their payroll size in 2012. To do this, you need to assess which employees will need to be enrolled in the scheme and this is based on employees’ ages, wages and opt in or opt out choices.

Not sure where you might fit? The Pensions Regulator has created this useful calculator to find you’re staging date.

So – what do you need to do?

Once you know your staging date, you will need to start planning – and there is a lot to do!

If you are an Employer, you should ensure you understand the basic information on these changes, your staging date and which Employees will be affected. A review of existing arrangements should also be undertaken sooner rather than later. A review is also important as The Pensions Regulator, who will oversee the implementation process, does carry the power to levy fines of up to £400 or a fixed amount then daily fines of up to £10,000 on employers who do not take action.

If you are an Employee we can also undertake a full and tailored review as to where you sit currently within the proposed workplace pension’s reform regulations.

If you currently don’t have a work place pension scheme in place or need to make sure your current one is compliant with the new guidelines – contact us today.

The Pensions Regulator has published over 250 pages of notes to help employers comply with their new responsibilities, which in essence breaks down into 33 new pension responsibilities for each employer!

To make life a little easier, we have broken them down into 5 main areas – here is an overview of your main duties:

• Categorise your workers. You may think everyone should be included in auto-enrolment, but it’s not that simple.
• Communications. There are a number of different communications you need to send to different categories of worker at different points in time.
• Keep detailed records of opt-ins and opt-outs.
  • Employees can opt-out
  • Employees who aren’t eligible now
  • May become eligible
  • Opted out employees may change their mind.

Detailed records relating to all this movement must be maintained and updated at all times.

• Manage your payroll. Your payroll system will need to ensure the correct contributions are payable for each employee every time the payroll is run (see FAQ’s to see how much you will need to contribute).
• Choose a pension plan. You’re also expected to select a pension plan and take decisions about which investment choices to offer your employees – decisions that are usually only taken by pension professionals with many years’ experience.

There has been lots of discussion around how auto-enrolment will affect employees and debate around whether employers are ready. The truth of the matter is this –there are significant costs and time pressures facing businesses in rising to the challenge of implementing auto enrolment, and with fines for non-compliance, businesses will also pay the price for getting it wrong (see fines in FAQ’s).

For businesses that haven’t yet staged, auto-enrolment is fast approaching. It’s no longer that bridge in the distance. This is something you have to deal with now but with the right help and support, it doesn’t have to be a big obstacle to cross.

Each business will have a different ‘staging date. This is the date set by the Pensions Regulator for auto-enrolment implementation for each band of employers across the UK.

All eligible employees must be auto-enrolled on this date (or from an earlier voluntary date if approved by the Pensions Regulator, or from a later Deferral Date if you are using Postponement).

There are many staging dates over the period 2012 to 2018 and to help employers discover theirs, the Pension Regulator has created a calculator which can be found here.

What to do next

The implications of auto-enrolment are huge for any business, no matter how big or small. There will be lots of issues to deal with – from employee engagement, through to setting up a pension scheme and deducting contributions from your payroll system for each employee, each and every month.

If you currently don’t have a work place pension scheme in place or need to make sure your current one is compliant with the new guidelines – contact us today.