Declan Harrington is a financial advisor at multi-disciplinary practice Savage Silk. Here, he reviews what your newly established firm should be doing to get ready for auto-enrolment.
Almost a decade ago, the government announced its plans for evolving the state of pensions in the UK with its Pensions Act 2008, with the intention of addressing the lack of retirement savings made by many British workers. The auto-enrolment process began in 2012 and will be ongoing until February 2018. Many established companies have now made the transition, but new employers (1 April 2012 onwards) still need to make the switch in the coming months. With this in mind, let’s take a look at what you need to do in preparation for your staging date.
Know your deadline
The first thing you need to know is when your staging date is, which is when you will have to have everything in place for the new auto-enrolment system. The new rules are mandatory for UK employers, so you need to be prepared or you can face fines and penalties from the Pensions Regulator. Use their staging date calculator to find out when this key date is for you.
Find a suitable pensions scheme
The next step is to find a qualifying pensions scheme for your employees. The Pensions Regulator has set out detailed criteria that any scheme must meet, so you need to make sure the one you apply for meet these requirements. Should you wish to keep a current pension scheme, you’ll need to make sure that it stands up too.
Identify which employees will be enrolled
Next, you need to know who needs to be enrolled on your chosen scheme at the staging date. Any employees aged between 22 and the state pension age are required to be included, provided their earnings reach the ‘trigger’ in each pay reference period. These amounts are reviewed annually by the government, and you can find the latest information here.
Know what to do when someone opts out
Though auto-enrolment requires everyone to be included, your employees still have the freedom to opt out. There is a one-month window where they can decide to leave the scheme, and they must submit a notice that is usually supplied by the pensions provider. If this happens, you will need to refund any contributions they have made within a month of their notice. Those who opt out will be re-enrolled every three years, and they must supply you with new notice each time to remain out.
Stay on top of your responsibilities
As an employer, you have a responsibility to stay on top of your duties and compliance. This is important as you need to ensure your staff continue to benefit from their pensions scheme, and changes within your company can affect this. For example, if an employee’s earnings increase, you need to adjust your contributions accordingly. Undertake regular reviews of all your duties to stay up to date.
Within five months of your staging date, you need to submit a declaration of compliance to the Pensions Regulator that details your qualifying pension scheme and how you have met your responsibilities. This will be checked against PAYE details to confirm you are on track. The compliance process will be repeated every three years from this point.