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Pension auto enrolment: are you ready?

Pensions…love them or hate them, it is likely that you will have one at some point in your life. Or maybe not? A news article from today states that the number of Britons paying into a company pension plan is at a 60 year low with only £8.2 million or 35% of people in a scheme.

Perhaps then, it is not surprising that the government is bringing in automatic enrolment. Auto enrolment should certainly take the hassle out of joining a pension scheme for the majority of the population but it could cause companies a bit of a headache, especially those who have not had to think about providing a scheme before. So if you are an employer, what do you need to do to make sure you are prepared?

Even if you only employ one person, as an employer you must now provide a workplace pension for certain staff AND contribute towards it.

So when do I need to take action?

Now! You need to be ready to start enrolling staff from your staging date which is based on the total number of people in your PAYE scheme. The more staff you have the sooner it is likely to be- you can find out your staging date by visiting here:

http://www.thepensionsregulator.gov.uk/employers/tools/staging-date.aspx

How much is this going to cost?

You will need to pay a regular contribution into the pension pots of your staff. There are minimum contributions you have to make – these are set at 1% of employee earnings but are due to increase after 30th September 2017.

There will be costs for setting up your scheme, getting software to manage automatic enrolment and other general advice.

Do I need to enrol all of my employees?

You may not have to enrol all but you do need to assess them for eligibility based on their monthly earnings and age. For example, for 2014/15, if someone earns over £833 per month and are aged between 22 and state pension age then you would need to automatically enrol them.

So what do you need to do?

1. Start preparing up to a year before your staging date; if you leave it to the last minute then it could cost a lot more and become more complex to prepare!

2. Choose your software, ideally that which is specifically tailored to auto enrolment which will help you keep track of the ages and earnings of your staff

3. Get your records in order. Make sure you have DOB, NI numbers and contact details easily to hand.

4. Choose a pension scheme that is well-run and offers good value for money. You may already have a scheme so you could check with that provider if they have an appropriate scheme. Otherwise there are many options including a Government one called the National Employment Savings Trust (NEST)

5. Talk to your staff- they might have heard about auto enrolment in the media.

6. At your staging date identify who you need to automatically enrol and who has a right to join on request. Provide your scheme provider with the info promptly and make sure you pay the contributions before the deadline!

7. Write to your employees telling them how auto enrolment affects them.

8. Complete a declaration of compliance confirming you have fulfilled your legal duties- this must be done up to 5 months from your staging date.

9. Maintain appropriate records and continue to fulfil your responsibilities by checking each payday to see if any new members are eligible for the scheme.

And remember…..

…..do not persuade or force anyone to opt out as this is against the law. For example, you must not offer a bonus or withhold a pay rise to persuade someone to opt out.

For more info and helpful templates, here is a link to the government e-brochure:

http://www.thepensionsregulator.gov.uk/employers/e-brochure/index.html#12

Millward, May & Co