Preparing for Pension Reform

If you are an employer, you need to be aware of the pension responsibilities that will fall on you in April 2012. This is when the requirements of the Pensions Act 2008 come into force, and for every employee aged between 22 and 65 on April 3rd who earns above a specified amount – likely to be £7,475.00 – you will be obliged to automatically enrol them on a qualifying pension scheme. Your mandatory contributions are going to place an additional burden on your overheads, so it is important that you start making plans now, if you haven’t already started. While you will have a ‘staging’ date for compliance which is later than April 3rd, based on the number of people in your PAYE scheme, getting organised for it ahead of time will save you a last minute panic and possible repercussions for your business.

Registering With the Pensions Regulator

This is also mandatory and can be done on-line when the time comes. You will have to keep accurate records to prove you have complied with regulations in respect of all qualifying employees.

The Right Qualifying Pension Scheme

First you must decide on the pension scheme. You may already have a scheme in place, in which case you just need to be sure it qualifies. If you have no experience or knowledge in this area you would be wise to get some professional help. The first thing to do is discuss it with your outsourced bookkeepers, who will have their own experience as well as contacts with experts in the field.

Budgeting for the pension Scheme

You will have to work out how you can manage the extra cash burden, another area where your outsourced bookkeepers will be able to help. It should be added to your business plan and cash flow forecasts.

Informing Staff Affected

There will also be an impact on the personal finances of your staff members. Their contribution will start at 1% of salary, so they need to be able to plan for that too. While this is something that should be seen to be in their best interests, they should also be made aware of their option to opt out and get a refund of the first month’s contributions. The regulations require you communicate the relevant information to each employee in writing.

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