Auto enrolment and workplace pensions
Employers must set up a work place pension and contribute for certain types of their workers. You may already have a pension scheme set up, but it must comply with the criteria of the auto-enrolment rules if you are to use it. One of the many criteria is that all employees must be accepted immediately i.e. no trial period or three months’ introductory period. You may therefore need to set up a new scheme in order to comply.
There are large penalties for non-compliance. Our understanding is that The Pensions Service (TPS) will enforce these penalties rigorously. If you think H M Revenue & Customs are ruthless and not always fair, then you haven’t seen anything yet…!!
All your workers aged between 22 and retirement age must be automatically enrolled if they earn £111 or more in a pay period. So, if all your employees earn below this limit, but one day they get a bonus or more overtime than usual, then you must enrol then and deduct their contribution by the end of the pay week or month. Similarly, if one of your employees turns 22 in the middle of a pay week or pay month then you have to deduct and pay over their contributions, together with the employer’s contribution.
You may not have heard of middleware. It is software that takes your payroll data after you have run the payroll calculations analyses it and then tells you which employees need to be included and what need to be deducted and paid to the pension provider. You then complete your payroll and send out payslips etc.
The date when you must have the pension scheme in place and start to contribute is defined as your ‘staging date’. As a small employer, your staging date will be anything from April 2015 to August 2017 and will be determined by the last few digits of your PAYE reference.
The Pensions Service (TPS) have produced a set of rules nearly 200 pages in length. All employers that have employees within the age and pay criteria must comply.
It is not a quick and easy process to just complete a few pages of paper or pages on a website. A considerable amount of time and energy is required. Allow for 100 hours is what I’m being told. The word on the street is that you should allow a year and possibly 18 months to deal with all the paperwork and registration process.
Pension providers do not have to take you on as a client. There is going to be an exponential number of employers having to register in the next two years and pension companies will have to massively increase their new business departments to cope. However, most of the big pension companies simply do not want your business; it’s just not profitable for them if you only have one or even a handful of employees.
Our advice is to get up to speed now and start looking at how you will deal with your obligations. You may not have any employees now within the age or salary band, but the day they do enter the relevant criteria you have to comply.
We shall be working with a national, but locally based, firm of independent financial advisers to guide our clients through the maze. For our smaller clients, they can expect bills of around £1,000 to ensure compliance.
We can confirm that if your business only has you, as the owner-manager-shareholder and that you have no employees then there is no requirement to enrol within the scheme. However, if you have another employee, including a family member then you must be enrolled for work place pensions.