Auto Enrolment was brought in by the government in October 2012 to ensure employees save into a pension. It began with larger companies and has gradually been phased in so that all employers, regardless of size, will be included. 2016 and 2017 will see a huge wave of over a million SMEs reach their staging date, so it’s vital that you’re prepared.
All employers will be required to assess their workforce and set up a compliant pension scheme.
Workers must be automatically enrolled if:
• They are between 22 and State Pension age.
• They earn at least £10,000 a year.
• They work in the UK.
Workers who meet the criteria will need to have their contributions calculated through payroll software, then submitted to the pension provider. Employee and employer contributions will be set at 1% each initially, and will gradually increase over the next few years.
Workers who have been enrolled can opt out and those who do not comply can opt in, so these facilities need to be in place.
NB: If you use HMRC’s Basic PAYE Tools please note that HMRC have not yet developed any add-on feature to deal with assessment, although this link suggests it is in the pipeline. It may be worth considering your options in the meantime, so feel free to speak to us for more info.
When do I need to act?
To find out when your staging date is for Auto Enrolment go to The Pension's Regulator's staging calculator. You will need to enter your PAYE reference.
It is advised that you start putting things in place around 6-12 months prior to staging to ensure everything is set up in time. The Pensions Regulator will issue fines for non-compliance so it’s worth making sure that you have ticked all the necessary boxes. See this link for what you need to do and when.
It’s worth noting that you can look into pensions and set everything up yourself – it’s not a legal requirement for you to seek financial advice first. However, this can be a complicated and time-consuming area, so even though it may prove more costly, it may save you an awful lot of time if you seek advice/pay for someone to set everything up for you.
The Pensions Regulator provides a lot of advice on choosing a scheme and setting it up yourself and there are numerous companies offering Auto Enrolment solutions on the web.