Pensions and savings are big news at the moment, so just what do employers and owner-businesses have to do? Here’s a simple, no-nonsense guide to Auto-Enrolment
What is Auto-Enrolment?
Auto-enrolment is a government initiative to ensure more people save for their retirement. Employers are now legally required to automatically enrol certain employees into a workplace pension scheme with contributions being made by both the employee and the employer.
Who does it apply to?
If you have at least one employee paid via a PAYE scheme you need to ensure you comply with the regulations.
What do business owners need to do?
Employers need to assess their workforce for eligibility, choose and set up a pension scheme (if needed) and make necessary amendments to existing payroll processes.
There is some relaxation of the rules for small, family-owned limited companies. Many pay the directors a small salary and use dividends to top up their income. If no employment contract is in place it is possible for the company to claim that they should not be treated as an employer. See full details at www.thepensionsregulator.gov.uk
Timescales? When do they come into force?
Eligible employees need to be enrolled into the workplace pension scheme from a given ‘staging date’ provided by the Pensions Regulator, with all existing employers expected to have ‘staged’ by April 2017. Find out when your staging date is at www.thepensionsregulator.gov.uk/employers/staging-date
Nick Bairstow, partner at accountants Moore Stephens, says: “Ideally businesses need to start preparing for auto-enrolment at least a year before their staging date. With tens of thousands of businesses all reaching their staging dates over the next two years, pension suppliers will be busier than ever before. Auto-enrolment is a complex process, so the longer you can give yourself to plan, the better.”
If you don’t do anything, what happens?
Failure or refusal to enrol employees into a qualifying scheme could mean an initial fixed penalty charge of £400 with continuing failure resulting in further daily fines.
The table below shows which employees need to be enrolled
| Employee monthly gross earnings | Employee age | ||
| 16-21 | 22 to state pension age | State pension age to 74 | |
| £486 per month and below | Employee has a right to join a workplace pension scheme but it is not compulsory for the employer to contribute | ||
| Over £486 up to £833 per month | Employee has a right to opt in to the auto-enrolment pension scheme and the employer must contribute | ||
| Over £833 per month | Has a right to opt in to auto-enrolment as above | Automatically enrol | Has a right to opt in to auto-enrolment as above |
For further financial advice go to www.moorestephens.co.uk/eastmidlands