By Paula Abbott, Tax Director, Lloyd Piggott
Whatever your opinion on Auto Enrolment, the government is actively getting behind the issue of retirement and is spurring the British public on to do the same — which is proving to be successful going by the governments latest opt-out figures. However, although people are buying into the premise of the scheme, the consequences of failing to plan ahead seem to be getting lost somewhere in the hype, leaving many businesses vulnerable and in need of direction.
Auto Enrolment (AE) is an initiative that will affect all businesses at some point between now and 2017, yet awareness of its implications has been surprisingly low. This, paired with confusing jargon and the threat of potential fines, has left some businesses feeling quite nervous. It’s important that companies that haven’t yet looked for structured guidance on the next steps do so now, as they could be left with a hefty fine and a smaller choice of pension providers. It’s also important for them to know that we believe many of these providers will not necessarily be able to offer them a scheme so the importance of companies contacting a pension provider as soon as possible can’t be stressed enough.
Although Auto Enrolment encourages a move to make us all more efficient savers, it does potentially apply a lot of pressure on companies that may already find their resources stretched. The legal requirement to offer employees pension schemes and the requirements of employers to contribute to the pension is a lot to take on especially for smaller employers. A common misconception amongst business owners is if they don’t have staff members who want to join a pension scheme they do not need to comply, however, action does need to be taken and a scheme needs to be set up and maintained even if all employees opt out.
As the set up task is far more complex than simply activating a pension scheme, companies need to be made aware that they need to assess in-house capabilities to manage this and appreciate that they may not have the software resources available. Therefore, finding an accountant to assist you in the process of completing the payroll and complying with your pension requirements is paramount.
Although The Pensions Regulator is advising businesses to leave at least 12 months for the overall set up of AE, for many it has fallen on the ‘I’ll look at that next month’ pile. Businesses need to ensure their accountancy firms are actively informing them about impending staging dates and the associated penalty costs now, allowing the company enough time to organise setting up a Pension Scheme and laying out clear steps that need to be taken.
Next steps for businesses and their accountants:
– Find out your staging date from the Pensions Regulators website— this will be determined by the number of employees you have in the business. This date is when you will need to be ready for AE
– Speak to a pensions advisor
– Nominate a key company contact, and an accountancy contact
– Develop your initial plans
– Choose your software and check records (many businesses will choose to outsource this to an accountancy firm who might already process their payrolls)
– Choose a pension scheme
– Tell your staff — advise your staff of the impending staging date giving pension scheme details.
– Assess the eligibility of your staff
– On and after your staging date, notify staff members who have automatically been enrolled
– Complete your declaration of compliance (registration)
– Maintain records
– Fulfil ongoing responsibilities (which include assessing staff members each time payroll is run).