Auto Enrolment
Why has Auto Enrolment been introduced?
The main reason is the shift in the dependency ratio, the number of people in work who pay their taxes to fund people in retirement. This has been falling over the years and so there are now more retirees than ever before. In addition the workforce to support these retirees is falling. This is a real problem for the government and puts a real strain on the state pension. Legislation has therefore been bought in to force employers to act.
The Auto Enrolment rules came into effect in October 2012 for larger employers, with further staging dates over the next 5 years depending on the number of employees in a firm’s PAYE scheme.
Click here to find out your companies staging date.
The Pensions Regulator has provided guidance to help employers through the process of Auto Enrolment. The paper they provide is currently 254 pages and this excludes any updates and templates they provide. In essence there are 33 new pension responsibilities for each business.
The main duties can be broken down into 5 core areas;
Categorising your Workers. It is not as simple as including every member of staff into an Auto Enrolment pension scheme, therefore the staff need to categorise your staff. Employers must be able to understand their workforce, who is to be enrolled and who is available to join the scheme. The definition of who is your workforce is complex and changes over time.
Communicating. You will need to make a range of official communications to different categories of workers at specific points in time.
Keeping Detailed Records. You will need to update and maintain detailed records at all times.
Managing your Payroll. You will need to ensure the correct contributions are payable for each worker every time the payroll is run. The requirement to contribute can create cash flow challenges.
Choosing a Pension Plan. You are expected to select a pension plan and make investment choices to offer your staff.
There are significant time pressures facing employers to ensure they implement and adhere to the rules of Auto Enrolment. Fines will be issued to businesses who are not complying with the Auto Enrolment rules.
The fines that can be imposed are not empty threats. The Pension Regulator has already issued fines to companies who have not complied with Auto Enrolment rules. Businesses are paying a high price for getting it wrong.
A lot of employers are being caught out by believing that their existing pension is appropriate for Auto Enrolment when often these schemes are not.
In addition employers who are finding that their pension scheme is Auto Enrolment compliant, the scheme will not accept contributions from the lower paid members of the workforce.
For businesses that have not yet staged, you will have to deal with this right now. With the right advice and support we can help to relieve the pressures.
Click here for an example of how we have made a business considerable savings whilst ensuring they comply with Auto Enrolment legislation.
Please contact us to arrange a free initial consultation to hear how we can help guide you through the Auto Enrolment minefield.