Pension auto-enrolment started a year ago and over 1,600,000 have been enrolled, with about one in ten opted out. If you have eligible employees, by now you should be well into your planning for this in your business.
Who Will Qualify?
To be eligible, employees should be at least 22 years of age and under the State Pension age. They should also be earning more than £9,440 a year from your employment working in the UK. This figure is the current level of the income tax personal allowance and may be subject to change. Other staff may be eligible to opt-in or to join. All businesses which, according to HMRC, had eligible employees at April 2012 have been allocated staging dates by which they must comply. These dates depend on the size of their payroll, but all employees should have been auto-enrolled by 2019. If you don’t know your staging you can find it by entering your PAYE number on the Pensions Regulator website.
Within four months of your staging date, you must have enrolled your eligible jobholders and registered your scheme online at autoenrol.tpr.gov.uk. The Pensions Regulator website gives a detailed list of all the information required at the time. You must also inform other staff of their options to opt-in or join.
Even if you currently have no eligible employees to enrol, if you have been given a staging date, you must register. That means you must have a qualifying pension scheme in place. The National Employment Savings Trust has a public service obligation which means it must accept all applications from employers, but many other pension providers will also qualify. To save yourself a lot of time and aggravation, you could ask your outsourced bookkeepers for some help with all this.
Budgeting for the Extra Expenses
Once you have completed your enrolments you have to pay at least the minimum contributions, which will start at 1% of the employee’s wage and increase over time to 3%. Depending on the number of employees, this could add up to a significant extra financial burden, so it is important to budget for it, and for all the other associated administrative expenses. Of course the employees’ contributions will have to be included as deductions on your payroll. It will be really important to have up to date software for payroll administration, and to have the right systems and procedures in place for these new regulations. Again you may need to look to your outsourced bookkeepers for assistance.
Make sure you don’t fall foul of the Pensions Regulator which has already opened investigations into possible non-compliance in over 80 cases, has been issuing warning notices and its first non-compliance notification over a failure to register. The penalties imposed can be very costly to those businesses concerned.