Auto Enrolment - No employees
A basic overview:
The law now requires all employers to implement workplace pension arrangements for employees. This process is known as 'auto enrolment' and it requires you to:
- Provide all staff members with information regarding the changes and how they will be affected
- Pay over pension contributions for any employee who joins the scheme
- Automatically enrol employees who are eligible into a qualifying pension scheme
- Register the company with The Pensions Regulator and comply with the relevant laws
Which employees are affected?
|-||16-21||22 - State Pension Age||State Pension Age - 74|
|Less than equal to £5824||Entitled Worker||Entitled Worker||Entitled Worker|
|Over £5824 and up to £10000||Non-Eligible Jobholder||Non-Eligible Jobholder||Non-Eligible Jobholder|
|£10000 +||Non-Eligible Jobholder||Eligible Jobholder||Non-Eligible|
Eligible jobholders will be automatically enrolled into your pension scheme.
Non-eligible jobholders will not be automatically enrolled but can ask to join your scheme and receive the same contributions as an eligible jobholder.
Entitled workers will not be automatically enrolled but can ask to join the scheme. If they ask to join, you are not obliged to make any employer contributions for them.
If the employee is already in a qualifying scheme you will not have to enrol them onto yours.
When do you need to act?
Each company has a 'staging date', but this is the date that you are required to have your scheme fully operational and setting up the scheme requires significant amounts of preparation time.
We recommend that you start the process now, for the following reasons:
- Capacity issues are already apparent to pension providers and advisers involved in Auto Enrolment and this will only intensify as more employers reach their staging dates. As a result, we believe that:
- pension providers will be very selective about who they accept an application from (so your choice of scheme is likely to be limited the longer you wait), and
- professional advisers helping companies to set up schemes will charge premium rates because of the high demand.
- Early adoption will ensure that you take into account the company's pension contribution liabilities when negotiating new pay agreements (the employer contribution rate is currently 1%, but rises to 2% in April 2018 and 3% in April 2019).
- From April 2015, all restrictions on accessing your pension pot on retirement were removed. This removes the most common reason given for not investing in a pension fund.
- Pension contributions have always been a very effective way of reducing company tax liabilities and providing cost effective retirement benefits for directors/employees, but the fact that you no longer have to buy an annuity or pay punitive tax rates on withdrawal of your fund seriously enhances their appeal.
- Auto enrolment is a relatively cheap way of establishing a scheme, and the ongoing charges levied by scheme administrators are much lower than amounts charged for other types of pension scheme.
The initial minimum contribution starts at 2% of qualifying earnings (earnings between £5,824 - £42,385 for 16/16), but increases to 8% per annum by October 2018 onwards.
|Date||Total minimum contribution %||Minimum employer contribution %||Minimum difference to be paid by employee + Tax Relief (government pay 20% of employee contribution) %|
|October 2012 – 5 April 2018||2%||1%||1% (0.2% by government)|
|6 April 2018 – 5 April 2019||5%||2%||3% (0.6% by government)|
|6 April 2019 onwards||8%||3%||5% (1% by government)|
Penalties for non compliance
The regulator will also have the power to issue a fixed penalty of £400 to an employer, as well as an escalating penalty at a daily rate. The table below illustrates the escalating penalties that might be applied to employers for breaches of their automatic enrolment duties.
|Number Of Employees||Prescribed Daily Rate (£)|
In addition to this there is a maximum fine of £5,000 in place for a 'Prohibited Recruitment Conduct Penalty Notice' and where contributions have not been paid fines of up to £5,000 per individual and £50,000 per organisation are in place as a 'Civil Penalty Notice'.
If a company fails to pay a penalty the Pensions Regulator can take legal action to recover it, with criminal prosecution and a maximum 2 year prison sentence for continued non-compliance, so it is vital that you get things right.
How we can help:
- Implement a scheme that meets all legal requirements.
- Provide you and your employees with support throughout the process.
- Ensure compliance with The Pension Regulator to avoid fines and penalties.
- Review the scheme on an annual basis to ensure you remain compliant and report on performance.
- Assist with ongoing pension scheme administration, including payroll (whoever does your payroll should also be responsible for auto enrolment and the costs for the auto enrolment software add-ons are significant so you may wish to consider outsourcing the whole
We offer a fixed fee of £495.00 + VAT for the following services:
- Registering your business with the Pension Provider of your choice and dealing with the related administration.
- Notifying all of your staff of the changes in workplace pensions.
- Reviewing and updating your payroll to make it ready for auto enrolment.
- Registering your business with the Pensions Regulator.
- Preparing and running ‘test’ uploads to the Pension Provider to verify that your reporting meet the required standards ahead of the first proper transmission.
We also offer an instalment option for paying our fees if your staging date is more than one year away and you wish to spread the cost.
If you wish to discuss ongoing payroll/pension scheme administration please call us to discuss your requirements.