How will it affect you and your business?
What is auto-enrolment?
The Government wants to encourage more workers to save for their retirement, rather than simply relying on what is becoming an increasingly smaller state pension. It wants all employees to be automatically enrolled into a workplace pension scheme, if they are not already in an equivalent scheme, with employers required to contribute to each individual’s pension fund.
Who will it affect?
Anyone aged from 22 to the state pension age, earning enough to pay income tax (at present, more than £9,440) will be automatically enrolled in their employer’s pension scheme.
Those who fall below this threshold can still join and receive employers’ contributions, but employers are under no obligation to enrol them automatically. Employees who earn less than £5,668 a year can still join but will have no right to employers’ contributions.
Those aged under 22 will automatically join the scheme when they either reach that age or start earning above the threshold. Employees can choose to leave a scheme at any time and any pension built up will stay in place, although they won’t be able to get their contributions back. They can also rejoin at any time.
When will I have to start auto-enrolling my employees?
Larger companies employing at least 120,000 people started auto-enrolment from October 2012. By April 2015, all companies with at least 50 employees will have initiated auto-enrolment. Companies with 40-49 employees have a staging date of 1 August 2015, and those employing 30-39 will stage on 1 October 2015. Smaller companies with fewer than 30 employees will begin auto-enrolment between 1 April 2015 and 1 April 2017. Individual dates are dependent on the last two characters of their PAYE reference numbers. If you would like to clarify your own staging date or for further information, please Call us.
How much will I have to pay in?
Between October 2012 to September 2017, employees will pay in a minimum of 1% of their salary (tax relief is applicable to this). As an employer, you will top this up to a minimum of 2% in total. The minimum total contribution will rise to 5% from October 2017 to September 2018 with at least 2% coming from the employer and from October 2018, a further increase to 8% with at least 3% coming from the employer. Contributions can be increased to the normal limits (full salary or £50,000 reducing to £40,000 from April 2014 – whichever is lower).
What if I already offer a workplace pension scheme?
Provided your existing scheme meets the minimum standards for auto-enrolment then you can continue to use it, although you will need to register it with The Pensions Regulator (TPR) within four months of your start date. You will also need to re-register every three years.
Which provider should I use?
As an employer, you can choose which provider you use. NEST, the National Employment Savings Trust, is just one possible provider of pensions via auto-enrolment, however it may not necessarily be the best scheme for your business. We have fully investigated the market and can advise on the best option for you.
What if I don’t want to take part in auto-enrolment?
Auto-enrolment is not optional and, as an employer, you have a duty to offer your employees an appropriate scheme. They can choose to leave the scheme if they wish, but you are legally obliged to offer one, in the first place. You could face substantial fines and even imprisonment if you fail to comply.
How can ADN help?
At ADN, we recognise that auto-enrolment will place an additional burden on many smaller businesses in the form of new processes, record keeping and reporting requirements. Thankfully, we can take care of everything for you, from helping you find the most appropriate scheme for your business through to ensuring you meet your obligations in terms of record keeping and reporting. By taking this burden from you, we leave you free to focus on what you do best – running your business.
Call us to book a free consultation.