The auto enrolment pension programme started back in 2012 when the largest employers had to commence offering an auto enrolment pension scheme to every eligible employee.
2015 will see the commencement of 1.2 million small and micro businesses starting to offer auto enrolment pensions.
AccountingWEB has set out eight key points employers (and their advisers) need to know about auto enrolment:
1. Every employer in the UK will be affected by auto enrolment
Even those paying a salary to a spouse will need to consider their situation.
2. Employers with NO-ONE in the pension scheme do not escape
They will still need to perform many administrative tasks each and every pay reference period.
3. Employers will need to keep records for up to 6 years
Irrespective if no-one enrols in the pension scheme.
4. Employers have a pre-set deadline to get ready by
The deadline dates (staging dates) are based upon number of employees in April 2012.
5. Every employer must already be compliant by their staging date
This can include having in place a fully compliant pension scheme, ready to accept employees.
6. There is a lot of work required prior to staging dates
Preparing for staging will require a significant amount of time and resource and it is recommended that employers begin at least 6 to 9 months prior to their staging date.
7. Staging preparation will affect the employer for years to come
Employers should start well in advance of their staging date, to make well informed decisions, as their decisions and actions will have lasting impact on the business and employees.
8. Hefty fines or even prison could be a consequence
The pensions regulator can inspect any aspect of the pension compliance process. It can fine and even imprison directors in cases of persistent non-compliance.
Understanding the costs of auto enrolment to a small or micro business will be very important but in many cases will be difficult to quantify fully. However the actual pension contribution percentages are set at minimum levels as follows:
|Year||Employer % Contribution||Employee % Contribution|
|Employer’s Staging date to 30 September 2017||1%||2%|
|1 October 2017 to 30 September 2018||2%||5%|
|1 October 2018 onwards||3%||8%|
The main cost to your business will be TIME! The amount of time will depend on whether you absorb all of the preparations in-house or contract with an external adviser, such as a pension provider or accountant. However even if you outsource much of the preparation work you will still need to allocate time to liaise with your advisers and to collate information they request.
Once auto enrolment is up and running, there will be a little extra time required each month to manage the ongoing automatic enrolment responsibilities.
You will also need to consider what software you will put in place that can handle the requirements of automatic enrolment. This will usually be your payroll system, however some pension providers may offer this service instead.
As a small business you should allow 6 to 12 months to set up and implement an auto enrolment pension scheme.
So the first task for any employer is to check their staging date, ie the date from when the automatic enrolment duties come into force for their business, and this can be done at www.thepensionsregulator.gov.uk. All you need is your employer PAYE reference.
The website also offers a tool to help you create your own action plan based on your staging date.