It was way back in November 2013 when we wrote our first blog post on auto enrolment. It gave a brief introduction to what’s happening and what your responsibilities as an employer are. We also offered our services to all employers to help them wade through all the legislation to make sure they were prepared. In a nutshell, all employers are legally required to automatically enrol certain staff into a pension scheme and make contributions.
Since then, auto enrolment has been gradually rolled out across businesses with staging dates being determined by the size of your payroll (at April 2012). The roll out continues into 2015, now reaching businesses with fewer than 30 employees, and will continue through to 2018 for new employers. Our experience suggests that it’s these smaller businesses who sometimes need a bit of extra help and advice to make sure they’re taking all the right steps to get things in order, so we thought now was a good time for a bit of a reminder.
1) Start planning for auto enrolment
If you’re a business with fewer than 30 employees and you’ve not done anything about auto enrolment yet, it’s time to get your head out of the sand and focus! It does take a bit of planning, so the sooner you get cracking, the better. It can be hard to find the time when you’re already super busy with your day to day tasks, but this is something you’re going to HAVE to do at some point, so set some time aside to read up, or to pay us a visit, to get things underway. You might even decide that getting your scheme set up in advance of your official staging date will save trouble later.
2) Consider costs of auto enrolment
The overall cost to your business of implementing auto enrolment isn’t limited to the cost of the actual contributions. There will need to be quite a lot of communication with your employees to make sure everyone has a real understanding of their options – you will need to write to each individual on your pay roll at least once. You may also need to invest in new software to help you manage the process. Again, planning will help you identify and manage these costs.
You’ll also need to decide what contribution you want to pay. The minimum employer contribution is 1%, and will increase to 3%, but you may choose to increase this. Remember, pension contributions are tax deductible, so contributing more may provide you with a tax break. It could also make your staff feel appreciated, something which shouldn’t be underestimated! You’ll also need to decide the contribution your staff will need to make to be a member of the scheme. The idea of auto enrolment is to get more people saving for their retirement, so finding the right level for this contribution is an important aspect.
3) Check who needs to enrol
You may not have to automatically enrol all your employees – you’ll need to assess them all and decide based on their age and their earnings whether they will be automatically enrolled, or can choose to opt in to the scheme. You’ll need to make sure all your records are up-to-date before you start.
4) Check you’ve got the right software and systems in place
If you’re not in charge of pay roll at your organisation, it’s worth getting pay roll involved early on – at least some of the implementation is likely to fall to them. You’ll need to check whether your current systems can cope with the administration involved in auto enrolment too, or if you need to upgrade. Your pay roll team is likely to have some useful thoughts.
5) Choose a pension scheme
You’ll need to identify the right pension provider for your business. Working with an adviser (like us!) can help ease quite a lot of the legwork in that respect. Not all auto enrolment schemes are created equal. Some will charge set up fees, some will involve more complex investment choices for employees – you need to take into account all of these aspects to make sure the scheme will work for both you and your employees.
If you already have a pension scheme in place, check if it’s suitable for auto enrolment. We spoke about NEST in our previous blog post, which is one option provided by the government, but there might be better options out there for your business and your staff. Getting this bit right is really important.
6) Communicate with your staff
As mentioned, you’re going to have to communicate clearly with your staff throughout the whole process so everyone knows what’s going on, why, and what their options are. It’s likely that you’ll need to send a series of emails, or even host some group question and answer sessions to make sure everyone is clear. You’ll also need to send a letter tailored to each individual, depending on their situation, which will take some organisation.
7) Keep up to date
When your staging date comes, or your self-imposed date if you’ve chosen to launch auto enrolment sooner, you should have everything in place and all staff should know what to expect. You’ll need to maintain clear records and record your compliance with the scheme, as well as be aware of things like dates at which you may need to increase your contributions to remain compliant. You may also need to review your scheme from time to time to make sure you and your staff are getting what they need.
Hopefully you’ve reached this point and have been mentally ticking off all the things you’ve already done in preparation for auto enrolment. If you’ve reached this point with a growing sense of panic because you feel unprepared, give us a call. We’d be glad to try and ease your mind and point you in the right direction. There are also some useful tools on The Pensions Regulator website which can help with your planning process.
This article is for general use only and is not intended to address your particular requirements. It should not be relied upon in its entirety and shall not be deemed to be or constitute advice.
GreenSky Wealth Limited is authorised and regulated by the Financial Conduct Authority. FCA No. 629624. Registered Office as above. Registered in England and Wales, Company No. 07103441.
The Financial Conduct Authority does not regulate Tax Advice and some elements of Automatic Enrolment.