It will soon be compulsory for all UK employers – no matter how small or what service they provide – to have a workplace pension scheme in place.
This requirement, established by the Pensions Act 2008, has been dubbed ‘auto-enrolment’ because it’s automatic – employees won’t have to physically sign up to a workplace pension. The new legislation aims to promote a culture of retirement savings in Britain.
So what does your business need to know and how do you get ready for the change?
When you need to set up auto-enrolment
The exact date for pension enrolment becoming compulsory for your business, known as a ‘staging date’, will depend on the size of your business’ payroll. Once you know when it is, it’s best to start planning around 18 months beforehand.
Auto-enrolment started in October 2012; back then, though, it only applied to companies with 120,000 PAYE employees or more. Staging dates have since been introduced gradually, with many more set to take effect in 2016 and 2017. This phasing-in will take a total of five-and-a-half years to complete.
Why April 2017 will be important for SMEs
Among the most important staging dates for SMEs is 1 April 2017. This is when auto-enrolment takes effect for businesses with fewer than 30 employees.
However, some companies with up to 29 staff members will need to be auto-enrolled sooner, though this will depend on their PAYE reference. If the last two digits of their reference is 12-16, 3A-3Z, H1-H9 or HA-HZ, for example, their staging date will be 1 April 2016.
How to get ready
To get ready for auto-enrolment, you'll need to establish which employees are eligible for workplace pensions. If they’re aged between 22 and retirement age, work in Britain and earn a minimum of £10,000 per annum, they qualify – which means you’ll need to make employer contributions into their pension pots.
To ensure that employees are enrolled, you’ll need to make your chosen pension provider aware of their details: namely their full name, address, date of birth and National Insurance number.
It’s then a case of paying contributions taken from employees’ pay packets into the company pension scheme by a deadline agreed with the provider. Failure to pay on time, or not paying enough, could see your business fined by the Pensions Regulator – so it's worth looking into this well ahead of the deadline.
To find out more, visit the government's online workplace pensions portal.
