Pensions auto-enrolment: are you up-to-date?

With effect from 1 June 2015, small businesses employing fewer than 30 staff became bound by the requirements of the new pensions auto-enrolment regime, obliging them to automatically enrol all eligible employees into a qualifying pension scheme and to make a minimum contribution to that scheme.

The Pensions Regulator recently warned that even those who employ a single care worker, such as a carer or nanny, must comply with the auto-enrolment regulations, with very few exceptions.

Under auto-enrolment, employees over the age of 22 and earning more than £10,000 per annum now have the right to belong to a workplace pension scheme, unless they choose to opt out.

6 April 2015 saw an increase in some of the thresholds and limits for auto-enrolment. While the earnings trigger remains at £10,000 for 2015/16, the lower limit of the qualifying earnings band has risen to £5,824 and the upper limit of the qualifying earnings band is now £42,385.

Over five million workers in larger companies are already in the scheme, and an estimated 3.8 million workers are expected to be enrolled by smaller employers between now and 2018.

According to recent research, one in four small businesses is as yet unprepared for auto-enrolment. Business owners are being urged to ensure that they are prepared for the new regulations. Employers who fail to comply could be liable to enforcement action and/or a penalty.

We have produced a handy checklist to help employers with the auto-enrolment process.

Employer checklist

Nominate a point of contact

The Pensions Regulator will be writing to you with important updates as you prepare for automatic enrolment. It is therefore advisable to nominate a main contact within your firm who will take responsibility for managing all such correspondence.

Know your staging date and develop a plan

Your staging date is determined by the total number of people in your largest PAYE scheme, based on HMRC’s records as at 1 April 2012. You can find out your staging date by visiting www.thepensionsregulator.gov.uk/staging.

Assess your workforce

Under auto-enrolment, you will need to identify any eligible jobholders working for you. You will also need to consider whether you have an employer duty in relation to other types of workers including non-eligible jobholders and entitled workers.

Review your pension arrangements

Decide on the type of pension scheme you will offer. Do you have an existing scheme that meets (or can be changed to meet) the Government’s requirements, or will you need to set up a new one? You may also want to consider whether the new NEST scheme would suit your needs.

Communicate the changes

Employers are required by law to write to all workers (except those aged under 16, or 75 and over) explaining what automatic enrolment into a workplace pension means for them. It is worth noting that the communication requirements for the different categories of worker were recently simplified in a bid to ease the burden on employers.

Make sure you have a strategy in place for briefing employees and plan how you will manage any queries that arise. A range of letter templates are available on the Pensions Regulator website to help employers fulfil their legal obligations.

Automatically enrol eligible jobholders

Under the new regulations, employers are required to: provide information to the pension scheme about the eligible jobholder; give enrolment information to the eligible jobholder; and make arrangements to achieve active membership for the eligible jobholder. This should be carried out within the ‘joining window’ (the six week period from the eligible jobholder’s automatic enrolment date).

Register with the Pensions Regulator and keep records

All employers will need to register with the Pensions Regulator within five months of their staging date. Registration can be completed online. Employers must also keep specific records about their workers and their pension scheme(s).

Contribute to your workers’ pensions

From October 2018 all businesses will need to contribute at least 3% on the qualifying pensionable earnings for eligible jobholders. Employers are also required to make contributions for non-eligible jobholders who choose to opt in to the pension scheme.

And don’t forget to…

Budget for the cost increase

The changes will undoubtedly have financial implications for employers. Make sure you factor in the additional costs of contribution and administration into your budgets.

Review your systems

How will you adapt your existing administration and payroll systems to accommodate the changes? What are the time and cost implications?

Keep track of age and earnings

It is important for employers to keep track of their employees’ ages and earnings as some members of staff may move between the different categories of worker. This is especially important for workers who earn below the qualifying earnings threshold, or who are under 22 years of age.

For more information on pension auto-enrolment visit the Pension Regulator’s website at: www.thepensionsregulator.gov.uk. From reviewing your payroll needs to cash flow forecasting and budgeting, we can advise on a wide range of business and personal planning issues. Please contact us for further details.

June 2015 Newsletter

Welcome to the June 2015 Newsletter from Easterbrook Eaton Limited

In the wake of the General Election, businesses have been keen to outline what they see as the priorities facing David Cameron's new Conservative Government.

With many firms citing a sustained economic recovery as a primary concern, all eyes will once again be on Chancellor George Osborne, who has announced that he will deliver a second Budget on Wednesday 8 July. Please visit our website regularly for the latest Budget news and information.

Meanwhile, a survey of HR and finance professionals suggests that many would support a rise in pension auto-enrolment contributions. Compulsory employer contributions are currently being phased in, starting at 1% before rising to 3% from October 2018.

Businesses set out priorities for new Government

Small firms are looking for stability and certainty during the course of the new Parliament, a survey by the Federation of Small Businesses (FSB) suggests.

Of the 2,327 FSB members questioned, more than a third (35%) said they want a sustained economic recovery to be the top priority for David Cameron's new Government.

When asked what issues they would like the Government to focus on during the course of the next five years, 53% said they wanted ministers to reduce the regulatory burden on business.

Some 51% of those questioned called for simplification of the tax system, while 44% of respondents said reform of business rates should be a top priority.  

Commenting on the findings, Mike Cherry, National Policy Chairman at the FSB, said: 'Today's wide ranging research sends a very clear message on what small businesses want from the new Government - a supportive, light touch tax and regulatory environment in which to grow their business, creating prosperity and jobs.

'Over the five years of this Parliament, our members' top priorities are to lighten the burdens of regulation and tax, reform broken business rates, support the development and skills of young people, and improve broadband and mobile connectivity.'

Meanwhile, in an open letter to Prime Minister David Cameron, the British Chambers of Commerce (BCC) has called for 'bold action' on six issues that it says will determine the UK's economic future.

John Longworth, Director General of the BCC, wrote: 'In return for your continued commitment to an environment that encourages enterprise and aspiration, businesses in all parts of the UK stand ready to delivery prosperity, jobs, and sustained economic growth.

'Over the coming months, you must use your strengthened mandate to take bold action on six issues that will determine the UK's economic future.'

The letter calls for a focus on: public spending, trade, talent, investment, Europe and infrastructure. It ends with a request that the Prime Minister should 'make no apologies for seeking the highest growth and investment rates, and the lowest unemployment and taxation rates'.

The Confederation of British Industry (CBI) has also expressed its views in the aftermath of the election, calling for deficit reduction to be made a priority, along with finding 'more innovative ways to deliver public services and backing the final decision from the Airports Commission.'

Its thoughts were echoed by the Institute of Directors (IoD), which said that 'returning the budget to surplus must be the overriding goal in this Parliament'. A survey of its members also revealed that infrastructure and education are two other areas company owners want to see addressed in the coming years.

Auto-enrolment welcomed by employers, survey suggests

A recent survey of employers indicates that many would be keen to see a rise in auto- enrolment contribution levels.

The previous Minister for Pensions already noted that auto-enrolment would need to be assessed early in a new parliamentary term, and the survey of over 200 senior HR and finance professionals indicates that they agree with the proposal.

76% of those questioned by financial group Jelf Employee Benefits said they believed there should be an increase in pension contribution levels, while 15% disagreed. In addition, 85% of respondents thought that any increase should come from employer contributions - either wholly or in part - while just 14% thought that increased contributions should be made only by employees.

Auto-enrolment legislation requires employers to automatically enrol eligible employees into a qualifying workplace pension and pay a minimum contribution in the fund. The measures are being phased in between 2012 and 2018, depending on the size of the business.

Head of Benefits Strategy at Jelf Employee Benefits, Steve Herbert, said: 'Frankly, we were a little surprised at these results. Many employers are yet to reach their staging date for auto enrolment, and a significant proportion of those who have already staged are not yet at the full contribution rate.

'It is very encouraging that employers continue to see the benefits of offering a quality pension scheme. A good pension offering will obviously help employees, and will also provide an important recruitment, retention and planning tool for employers'.

Visit the Your Money section of our website to explore a wealth of information on personal tax and savings issues, including our guide to auto-enrolment.