Auto-enrolment pensions duties explained
It would be hard as an owner of a business of any size not to know or have heard about workplace pensions and the government’s obligatory auto-enrolment scheme. The advertisements have been plastered over the TV of late, and there has been a plethora of stories surrounding it in the media – not least around penalties imposed on businesses for not meeting their duties.
But with various staging dates and other confusing elements such as number of employees or what pensions provider to use, many business owners are not sure where to start. Whilst there is a vast array of guides and advice available on the internet, and on reputable sources such as The Pensions Regulator website and the Money Advice Service, here is a quick overview of what it all means.
- Who it applies to – Every employer, no matter what size their business is or the sector they operate in, must put employees earning £5,824 or more per year into a workplace pension scheme, and contribute 1% towards this. For a company with one director, the scheme does not apply
- Staging dates – every business was given a staging date in April 2012, and this is something that can be found out by using the PAYE reference a business would have received from The Pensions Regulator. Entering the reference into the correct section on the website will give the staging date. Any employer not paying their employees through a PAYE scheme will have the staging date of April 1st 2017
- Pension scheme providers – finding the right scheme for your business will depend on factors. There is a government-run scheme – the National Employment Savings Trust (NEST) – and schemes run by independent providers. It is advisable to seek profession guidance on what scheme will be right for your business. Your accountant or business/financial adviser will be able to help with this. Briefly, some of the factors to consider are:
- What will work best with the business payroll software
- What the costs are for scheme administration
- Tax relief – members of staff can get tax relief on their contributions but some schemes only support one of the two tax relief methods available (net pay arrangements or relief at source), so it is worth checking to get the best deal
- Level of support – how the provider communicates with you and scheme members and handles the whole process can make a world of difference when implementing significant developments such as this
- Declaration of compliance – once the staging date is reached, a declaration of compliance must be submitted to The Pensions Regulator to advise that the employer has fulfilled their duty. This needs to then be carried out every three years, so that ongoing compliance can be checked and monitored.
The TV advertising campaign has focused heavily on the business owner that is ignoring his duties – and not without good reason. There are many business owners out there not preparing in time for this major change, and penalties being doled out by The Pensions Regulator – fixed fees of £400 for non-submission of declaration of compliance by the staging date. It can take up to 12 months to prepare for auto-enrolment, depending on the size of the workforce, so planning early is the best option.
Any of our clients who need advice on staging dates or further information around auto-enrolment can contact Tessa on 01827 54944.