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30th March 2017
The 2017 staging dates for auto enrolment are fast approaching for employers across the UK. With this in mind, it’s quite shocking to learn that new research highlighted the fact that less than 1 in 10 UK employees have a clear understanding of what auto enrolment pensions involve.
Pensions advice specialist, Portafina, conducted a poll of 2,000 working brits, with the aim to learn how knowledgeable people are of their workplace pension status, their attitudes and how many were confident in it to safeguard their financial future.
When the results came back, only 39% of workers could confidently say there were already auto enrolled – which is less than half. In addition to this only 16% could confirm they knew how the scheme actually works and just 10% said they felt glad that auto-enrolment takes away the hassle of pension planning.
84% said that they didn’t believe that auto enrolment alone would ensure they had sufficient pension money for retirement.
The Department for Work and Pensions are due to review the regime later this year. Managing director at Portafina, Jamie Smith-Thompson commented on this review:
“When the government’s review is released I expect it will have a positive outlook on auto enrolment. The rollout seems to be going as expected, the opt-out rates have been encouragingly low and government research has indicated the vast majority of small and micro employers are now aware of the policy.”
“What this new poll has highlighted is that communication around the benefits and limitations of auto enrolment needs to be massively improved. Our results show that even though people are enrolling, they aren’t confident in the process or what the results will be.”
As an employer, maybe it’s worth having a chat with your employees about what auto enrolment will mean for them. Ensure they know what it involved and see if they have any queries or concerns about the government’s scheme.
Every employer with at least one member of staff, has new duties, including putting those who meet certain criteria into a workplace pension scheme and contributing towards it.
It is estimated that around 801, 000 small businesses are set to reach their auto enrolment pension staging date over the course of this year. This number is more than double in 2016. We don’t know about you, but we think that’s a humongous figure! Many larger firms have completed the process, however, for the smaller firm this is the first time they have probably ever have had to think about pensions in any detail.
Results from a survey conducted by YouGov found that over half of SMEs felt that auto enrolment would be a burden and in addition to this a staggering two-fifth said it was unfair. However, 72% said that they didn’t believe that it would hurt their growth plans.
UKBF conducted a poll of their members and found that the majority of SMEs said that they are planning to tackle auto enrolment themselves, instead of outsourcing to an accountant, adviser or other professional.
If you do go down the route of doing it yourself, there are a couple of things to take into consideration when choosing a scheme that will work for your business:
Automatic enrolment legislation gives employers a duty to:
✓ automatically enrol all staff who are eligible (“eligible jobholders”)
✓ other staff who have the right to ask to opt in or join a pension
✓ manage opt outs and promptly refunds of contributions
✓ communicate to their staff
✓ complete a declaration of compliance with the regulator
✓ keep records
✓ maintain payments of the pension contributions
✓ every three years , automatically re-enrol staff who are eligible
The employee safeguards mean that employers:
x must not induce staff to opt out or cease membership of a pension and
x must not indicate, when recruiting new staff, that the decision to employ them
will be influenced by whether or not they intend to opt out.
If you haven’t already sorted out auto enrolment for your business, below is everything you need to consider:
#1 Do you know your staging date?
Check when your staging date is. If you still haven’t got it, contact The Pensions Regulator (TPR) or check out Gov’s new timetable that clarifies all staging dates. The staging date is not set in stone, you can bring it forward and (as long as you have a good reason) you can also delay for up to three months. It’s also worth signing up to the Government Gateway, you will have to eventually use this as a central website to show you have completed auto enrolment.
#2 Make a list of who needs to be enrolled
Making a list of everyone who needs to be enrolled will only make life easier for you, you’ll need everything to hand to enrol anyway. Staff members must fit the following criteria to enrol:
Staff aged between 22 – state pension age; AND
Who earn over £10,000 a year (£833 a month or £192 a week)
Below are staff who aren’t automatically eligible but if they ask can be included:
Staff aged between 16 and 74 who earn more than £5,824 but below the £10,000 threshold
Staff aged between 16 and 21 (or between state pension age and 74) who earn above the £10,000 threshold.
#3 Do you have AE duties for any contractors
The (truly) self-employed are excluded from automatic enrolment but how is this determined?
To check if you have any automatic enrolment duties for a contractor and is not an employee, there is a three part test.
A If the contractor is not truly self-employed would they be considered an employer?
B Does the contractor have a to do this work themselves (a personal contract)
C Is the individual carrying out the work as part of their own business?
#4 On going management
The employer must manually asses all staff every month and communicate with employees themselves. This is easy to get wrong! Assessment rules are both fiddly and subject to change. If you do not comply, you may be faced with a £400 fine.
#5 Managing finances
Whilst it is true that you will be saving costs with not taking advice, in the long term, businesses will have to figure out how they want to fund ongoing contribution costs in gross qualifying earning. Currently this is 1%, but this will go up to 2% when April 2018 comes around and increase to a further 3% in April 2019. Budget options:
#6 Have you declared compliance?
Within five months of your staging date, a declaration of compliance must be submitted to The Pensions Regulator. This is an online form and can be submitted through the Government Gateway.
#7 On going responsibilities for the employer
The employer is responsible to monitor things going forward even when everything is in place for example:
If you have come to the end of this blog and decided that you want to talk to a professional about auto enrolment we are all ears!
We as accountants can take care of the extra duties necessitated by Auto enrolment and allow you the time to concentrate on your business.
Simply fill in the form below and we can chat to you either over the phone or in person. This chat will be free and of course is not obligatory! Surely it’s good to just know your options?
have you read our previous post?