Employers’ Guide To Pensions
The law relating to pensions has been considerably reformed in recent years with the biggest change being that of auto-enrolment. All employers have to automatically enrol staff onto contributory pension schemes (or will have to depending on their staging date). The timing of when your business is required to do so is crucial to ensure you are prepared well in advance to comply with the law. Pension reforms is a complex area of law and it is always advisable that professional advice is taken with regard to detail and implementation.
Who is Entitled?
‘Workers’ are any individuals who work under a contract of employment (i.e. an employee), or who have a contract to perform work or services personally (i.e. they cannot send a substitute or sub-contract the work) and are not undertaking the work as part of their own business.
An eligible worker has a one-month period after automatic enrolment during which they may choose to opt out. ‘Opting out’ refers to a mechanism which has the effect of undoing active membership of the pension scheme.
Issues of Concern
Making auto-enrolment happen for your organisation and its employees could be a significant challenge. Auto-enrolment brings a new set of duties and obligations as well as major operational, financial, compliance and reputational risks.
It also has implications for your existing HR, pensions and payroll systems, processes, work plans and communications – not to mention the need to manage the potential influx of new members at your staging date.
Depending on the size of the organisation, this could be a major project for employers requiring significant resources. If advance planning is not put in place in good time, it could be a sizeable undertaking and distraction.
Do Employers Need to Do Anything?
Many employers will already have pension provision for their workers and this will often match or exceed the new minimum requirements. In these cases, such employers may just need to check that the minimum requirements are covered in their existing processes.
What To Do
- If you have a pension scheme, you should check to ensure that it meets the minimum requirements or whether adjustments are required.
- Find out when your staging date is likely to be.
- Work back from the staging date and make preparations by deciding on how to communicate with staff and manage the implementation.
- Prepare the data to send to your scheme and prepare the information to send to workers.
- Set up payroll processes.
- You must be ready to comply with the new duties on the staging date.
This is a rough guide to staging dates – there are many and it is a complex system. For smaller businesses the date will depend on the PAYE reference number. However, below we have given you a range (by no means all) of staging dates and some idea of the timescales you need to work to:
1st November 2013 – 500 to 799 employees;
1st April 2014 – 240 to 249 employees;
1st July 2014 – 50 to 89 employees;
1st August 2014 to 1st April 2015 – 50 to 62 employees.
If you have fewer than 50 employees, or are a new company registered after 1st April 2012, you will be staged between 1st March 2014 and 1st February 2018, depending on your organisation’s PAYE reference number.
You may want to align your staging date with other key dates in your financial calendar, such as the beginning of your financial year. To enable this, you may choose a different staging date, as long as it is an earlier one than the originally allocated date.
We are very grateful to Malcolm Lay (a long time adviser in employee benefits, consulting and administration) of Southampton based IFA (South) Ltd, Sovereign Employee Benefits who has assisted us in producing this guidance note.
For more specific details on your staging date, or anything to do with the auto-enrolment legislation, please contact Malcolm directly at Malcolm.Lay@ifasouth.co.uk
N.B THE CONTENTS OF THIS GUIDE ARE INTENDED FOR GUIDANCE FOR READERS. IT CAN BE NO SUBSTITUTE FOR CONSIDERED ADVICE ON SPECIFIC PROBLEMS. CONSEQUENTLY, WE CANNOT ACCEPT RESPONSIBILITY FOR THIS INFORMATION, ERRORS, OR MATTERS AFFECTED BY SUBSEQUENT LEGISLATION.