Workplace pensions. 10 ways to avoid taking a big one in the.................
You may have seen the adverts on TV with good old Theo fom Dragons Den and Nick from the apprentice spouting "Im in". Unfortunatley the adverts make it sound like a pension is a nice option to take. However, what the adverts don't really convey is that they are compulsory, with the option to opt out after they have started. Recently changes to pensions law started to affect all employers with at least one worker in the UK. If you are not organised and ready for auto enrolment then you will be saying "I'm in" - "in it right up to my neck".
To help get the ball rolling, here's a dummies guide to auto-enrolment.
Your responsibility as an Employer:
With effect from their particular staging date each employer will have to:
Enrol eligible jobholders who are not already active members of a qualifying scheme into an automatic enrolment scheme. An eligible jobholder is defined as a jobholder who is at least 22 years of age, earns at or above the personal income tax threshold of (£9,440 pa. 2013/2014 tax year)and has not reached pensionable age.
Maintain a jobholder’s membership of the automatic enrolment scheme (or another qualifying scheme), so long as he/she is employed by the employer and chooses to be a member.
Make relevant employer and employee contributions – minimum contribution rates, for money purchase schemes, are expressed as a percentage of qualifying earnings (between £5,668 and £41,450 in 2013/14 terms). The full rate of 8% (of which employers must pay at least 3%) will be phased in over a six year transitional period (extended from the original four years). If you leave it to the last minute then your cash flow is going to take the hit with your time being devoted to getting it right and the 3% contribution you have to put in!
Provide certain information to jobholders and workers
Register with the Pensions Regulator and keep certain records
Re-enrol eligible jobholders who have previously opted-out from a qualifying scheme, every three years.
Employers will have the option of waiting for up to three months before auto-enrolling some or all eligible jobholders, subject to giving the jobholders a prescribed notice within one month from the date they should have been enrolled and allowing them to opt-in during the waiting period if they so wish. A waiting period can be used in different ways across the workforce. This goes some way towards helping to ease the administrative burden on employers with high staff turnover and/or seasonal staff.
When are the changes happening?
The new employer duties started to be introduced in stages starting from October 2012, with the largest employers having to comply first. Each employer should already have been or will be allocated a date from when the duties will first apply to them, known as their ‘staging date.’ This date is based on the number of people in an employer’s PAYE scheme.
Employers can check their provisional staging date on the pension regulator website: www.tpr.gov.uk/staging.
To allow some flexibility, employers can choose to bring forward their staging date, provided the pension regulator is informed. However, employers cannot choose a later date than the one they are allocated. Finding out when the staging date is the first thing an employer should do, so they can plan what they need to do to be ready in good time.
10 Points to consider:
1. Auto-enrolment imposes new duties and, potentially, additional costs on your business.
2. It is not lot like stakeholder pensions, it is not going to go away and if you get it wrong you will be fined by the pension regulator!!!
3. The first step is to find out your firm’s staging date. That date may well be a few years off, however the earlier you start preparing the better because there are many points to consider, all of which could require additional professional insight.
4. Do you have any existing pension arrangements, could or should they be amended to meet the auto-enrolment provisions?
5. If you have no existing workplace pension, what route should you take?
6. What impact will compulsory employer contributions have on your business’s finances?
7. How will your current payroll system identify those eligible for auto-enrolment and cope with the collection, payment and, for opt-outs, refunds of contributions?
8. When should you start communicating to your workforce?
9. Who is going to administer the pension as its your ongoing responsibility to ensure it is fullfilled every pay reference?
10. For professional advice and support to review the current pension arrangements in place and ensure the most appropriate pension scheme or schemes are chosen and implemented at the outset on a case by case basis please contact Paul Smith at Abacus Associates on 01594 835675 or 07794583087.
Current best practice states it takes 12 months from the first meeting to implementation.
It is important to act now!!! Or take one in the .......
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