Posted on: 01 Jun, 15
A guide to the finer points of auto-enrolment
The process of auto-enrolment continues to rumble on quietly with the majority of companies passing their staging dates without major incident. However, for the few that fail to comply with their workplace obligations, the consequences can be costly in time and resources.
The Pensions Regulator has released its latest quarterly bulletin on auto-enrolment, showing that the number of fixed penalties given out in 2015 has exceeded the amount handed out in the last 3 months of 2014. As part of the bulletin, the regulator identified what it sees as the 3 main ways to prevent non-compliance:
It seems that while most companies are broadly aware of what auto-enrolment means for them, it is in the details that some businesses stumble into problems. To help overcome this deficit, here are some of the not so frequently asked, yet still important, questions about the auto-enrolment process.
A company’s staging date is the day when their auto-enrolment duties begin. Businesses need to prepare for this date by choosing a pension scheme, enrolling relevant employees, calculating the contributions and deductions, and informing your employees.
Staging dates are based on your PAYE reference, but once you have been handed the date is it possible to move it?
Every employer is able to bring their staging date forward to help align it with other important dates for the business such as the start of the new financial year. This can be done by notifying The Pensions Regulator through their website.
In order to shift the date forward you will need:
It is also possible to postpone your staging date by up to 3 months for all or some of your staff. This may be useful if you have temporary or short-term staff whose contracts are ending before the 3 months roll round.
Auto-enrolment can be postponed from the original staging date, although employers are required to write to all affected staff to inform them of the delay. Although there are a few technical details involved, your staging date is not set in stone.
Contact us today to talk about your staging date.
Another aspect of the auto-enrolment process that has not been widely discussed is how much implementation and compliance is likely to cost. There are likely to be a number of new costs that emerge from the process.
Costs associated with auto-enrolment are:
The pension scheme that you choose for your auto-enrolment programme will need to meet certain legal requirements. These include:
Note that it is not a legal requirement to seek consent from employees before auto-enrolling them onto the workplace scheme.
Whether you decide to go with the government-backed National Employment Savings Trust or a private scheme, the question as to who exactly needs to do what remains.
No matter what scheme you choose, as an employer you are responsible for the following:
In order to keep on the right side of the regulator and remain free of any fines, companies need to provide them with details of:
It is an important detail of the auto-enrolment process that the majority of pension-related duties remain with the employer. It is likely that a significant amount of the penalty notices being handed out originate with key misunderstandings of just what an employer needs to do.
Another question that is likely to become more of a concern for both employers and workers as time goes on is the issue of what happens when people change jobs. The idea of having a job for life is becoming increasingly outdated and the average person could have worked for many different employers by the time they retire.
The potential problem comes with the idea that an employer will need to be auto-enrolled in each new job. Unless all of their various pots can be easily consolidated they are likely to be left with a number of smaller pots.
Not only is this harder to manage, but the potential to lose track of details is significant. According to the Department for Work and Pensions, there is currently somewhere in the region of £3 billion gathering dust in 'lost' pension pots. The government estimates that by 2050 there could be 50 million dormant pension pots worth £757billion.
In anticipation of this problem, the government is beginning to implement a system of automatic pension transfers (or pot follows member) that will theoretically allow an individual to consolidate separate pots. The system will begin in autumn 2016 through initially offering people the option, with a view to introducing automatic transfers at some point after that.
We can help you set up and run auto-enrolment in your business.
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