February 6, 2014
Could auto enrolment spell trouble for SMEs?
It’s all change for UK pensions with the introduction of the Government’s latest shake up to employment law – auto enrolment.
The new legislation, a bid to ensure all UK workers have a retirement fund by the end of their careers, means all business must automatically enrol qualifying workers into a company pension scheme.
This has already kicked in for larger business. But now it’s the turn of small and medium business – who will find it much harder to get the support they need to get everything in place.
To offer quality benefits to your employees while keeping down costs and time, it is essential to ensure you have the most suitable pension scheme in place.
Why is the Government doing this?
In order to improve take up and therefore increase private pension funding, the government is bringing in auto enrolment and compulsory employer funding. So now, instead of employees opting in to pension scheme, they will be automatically enrolled into the scheme and contributions taken.
Your staging date
The date that the law applies to you is called your staging date. The earliest date was 1 October 2012 (120,000+ employees) gradually working down to companies 30 or less employees on 1 June 2015.
What are you responsibilities?
All employers must:
- Provide a qualifying pension scheme for workers
- Communicate the changes to all employees
- Advise eligible jobholders that they have been enrolled and give them the option to opt out
- Automatically enrolling all eligible jobholders onto the scheme
- Pay employer contributions for eligible jobholders
- Register with The Pensions Regulator – providing details of qualifying scheme and the number of people that you have automatically enrolled
- Process any opt-in/opt-out requests
- Monitor leavers, starters and casual employees, enrolling periodically as required
- Re-enrol all employees every three years
Penalties for non-compliance
Failure to comply will result in a £400 penalty followed by an escalating daily fine of between £50 and £10,000, depending on your number of employees. In addition, failure to pay employer contributions will cost you between £5,000 and £50,000 and breaching your compliance duties could cost you £5,000 a day.
The changes will have a huge impact on business planning so be sure to understand the effect it will have on your business over the coming years.
If you are unsure about auto enrolment and would like to avoid the potential penalties, download our free auto enrolment whitepaper now to help guide you through the process. You can also easily stay compliant with our quick and easy AE software.