Employers Guide to Auto-Enrolment€¦ · employer, you have a pivotal role to play - starting now....

T:01243 432430 | W: www.ifsnet.co.uk

Employers Guide to Auto-Enrolment

T: 01243 432430 | W: www.ifsnet.co.uk

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Contents

3. Introduction 4. What does auto-enrolment mean for you? 5. When will it happen? 6. Your workforce - who’s eligible? 7. Auto-enrolment - what it will cost your business?

8. Compliance 9. Reviewing your current pension arrangements 10. What now? 11. We’re here to help


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Introduction

An important change has taken place in the way pensions are paid and as an employer, you have a pivotal role to play - starting now.

Auto-enrolment was introduced in October 2012 and if your organisation employs a large number of workers, you may have already got the ball rolling. However, the deadline for auto-enrolment is on the horizon, so there’s no time to waste.

Auto-enrolment isn’t just about having a pension scheme which meets the new legislation - this is only about 20% of the work required. You also need to tell your workers about the changes, implement the systems and keep the systems updated. My estimate is that this constitutes around 80% - the lion’s share of the work.

At Independent Financial Solutions (IFS) we understand that the new legislation can be daunting, confusing and complex. We can help by providing clarity and guiding you through every stage of the process - from the initial free consultation and a tailor-made proposal through to on-going support.

By bringing us on board you’ll not only have complete peace of mind but more time to concentrate on your business. Make your life easier by acting now and contacting us today.

Call us on 01243 432430 or visit www.ifsnet.co.uk and our experienced team will be happy to help you.


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What does auto-enrolment mean for you?

Pensions have been a hot topic over the last few years and concerns over whether we’ll have enough to live on when we retire have been widespread.

The Government estimates that about seven million people are currently under-saving for retirement*. Auto-enrolment has been introduced to make it easier for people to save for retirement via their employers. The new auto-enrolment legislation affects every employer, regardless of the number of workers you have, which means you must have a qualifying pension scheme in place.

It could be one you already have in place, if it meets certain criteria, or you can use NEST - the National Employment Savings Trust. NEST is a simple, low-cost pension scheme being introduced by the Government.

Auto-enrolment means that you’ll have to automatically enrol all eligible workers into a qualifying pension scheme. This process will need to be reviewed and repeated every three years if a worker has opted out. However, worker assessment is actually a continuous process i.e. on a weekly/monthly basis (depending on how you pay your workers).

You’ll be required to contribute at least 3% of each worker’s eligible earnings. Their own contributions and tax relief will be added to this to meet a minimum 8% contribution rate. Other contribution rates are allowable.

Our auto-enrolment guide will give you an outline of what is involved and how we can help you; from the initial consultation to full implementation and beyond.

* Source: “Personal accounts: a new way to save” published by the Department for Work and Pensions: December 2006.


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When will it happen?

It’s happening now! Auto-enrolment started in October 2012 and the deadlines are phased. The number of workers you have determines when auto-enrolment kicks in - this is called your staging date.

By the time you reach your staging date, you’ll need to have a number of procedures and systems in place so you’re ready to enrol workers.

Although the Pensions Regulator will send you a reminder 12 months before your staging date, taking action now will save you money, time and stress.

Knowing your staging date is essential as it prevents you from facing a penalty - but don’t worry, we can help you get everything ready by the deadline.

Once you’re up and running, we can work with you to maintain your systems and ensure the scheme is always updated and ready for the three-yearly review.

Staging dates

July2012

Oct 2012

Feb 2014

April2014

April2015

June2015

Aug 2015

Oct 2015

Jan2016

April 2017

May 2017

Feb 2018

“Test tranche” <30

Vo

lun

tary

yst

art 250 or

more 249

to 50 49

to 30 <30

and no PAYE

New employer Apr 2012

to Sep 2017


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Your workforce - who’s eligible?

A worker is more than just an employee - it can potentially include some contractors or agency workers.

Auto-enrolment requires you to automatically enrol all eligible workers in a qualifying pension scheme and boost each worker’s contributions with contributions of your own.

The following criteria means that a worker is eligible for automatic enrolment:

• they aren’t already in a qualifying pension scheme

• they are aged between 22 years and State Pension retirement age, and earning over £10,000 in tax year 2016/17.

• they work in Great Britain.

What do you need to do?

Your staging date depends on how many workers you have so correctly assessing your workforce is essential - you’ll then know the deadline you’re working to.

We can help you work out your staging date if you’re not sure when it is.

By the time your staging date arrives, you must have a qualifying pension scheme in place. The qualifying scheme can be your existing company scheme, if it meets certain criteria. If not, it will need to be updated.

There are a number of minimum contributions for these qualifying schemes, one is outlined below:

Minimum contribution Employee pays Tax relief You pay

8% 4% 1% 3%

All eligible workers can choose to opt out but for those choosing to contribute their 4% plus 1% tax relief, you will have to contribute at least 3% of their ‘qualifying’ earnings (basic salary plus commissions, bonuses and overtime between £5,824 and £43,000 a year). This will apply immediately to all new eligible workers.

Please note these fi gures may be reviewed and changed by the government on an annual basis.


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Auto-enrolment - what it will cost your business?

Your business will probably face signifi cant additional costs through auto-enrolment. The costs won’t just be what you have to contribute as an employer but there are the administrative costs of registering and meeting your new enrolment duties. Detailed rules are in place on what you have to tell the Pensions Regulator and your employees, and also the processes for enrolling staff and dealing with opt-outs.

It will be more costly for those who don’t currently offer a company scheme or who don’t currently contribute to it for their employees and/or eligible workers. There will be a further cost if you are fi ned by the Regulator for non-compliance.

At IFS, we’re here not only to advise you on all of these costs, and to help prevent you from being fi ned, but we can help set up your new software or provide advice on how to use your existing system.

Client Benefi ts

• Your objectives and needs are met

• Auto-enrolment compliance

• More time to run your business – we deal with the complexities

• Retention of staff – we make sure they value the benefi t

• Financial effi ciency – good benefi ts provided cost effectively

UNDERSTANDING ANALYSIS

IMPLEMENTATION MEMBER COMMS

RECOMMENDATION REVIEW


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Compliance

Whichever qualifying scheme you use, you need to be aware of additional regulatory requirements.

These requirements ensure that employees’ rights are safeguarded and prevents non-complying employers achieving any competitive advantage, and should minimise the need for compliance action.

Here are the four key areas of risk.

1. Risk to auto-enrolment: you’ll be required to register how you will meet your enrolment duties for each of the PAYE schemes you run. Failure to register will be detected by comparing records with HMRC.

2. Risk to the opt-out process: you’ll be required to comply with new statutory employment rights. These will include the right of employees not to be dismissed on grounds related to pension membership and restrictions on agreements which limit your new duties and employees’ rights.

3. Risk to pension payments: your payments will be monitored by the pension scheme trustees or administrator, who will report any failures to the Pensions Regulator (essentially the same as the current situation with workplace pension schemes).

4. Keep pension records: a requirement of pension legislation is for employers to keep specifi c records about their workers and their pension arrangements. Most of these records must be kept for up to six years.


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Reviewing your current pension arrangements

You have two choices when it comes to auto-enrolment.

Either enrol each eligible worker into 1) an existing company scheme that meets, or can be updated to meet the required criteria, or 2) you set one up.

Your current pension scheme - do you qualify?

If you want to use your own company scheme for auto-enrolment, it will have to meet certain qualifying criteria, for example:

• Does it permit auto-enrolment?

• Does it meet the minimum contribution levels?

• Does it have a default investment fund (money purchase, stakeholder and GPP schemes)?

If your existing pension scheme cannot meet the qualifying criteria a new scheme will have to be set up.

EMPLOYER

SAME

CONTRIBUTION

TEST

OWN PENSION

SCHEME

SET UP A

PENSION SCHEME


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What now?

Get ready for auto-enrolment by taking the following steps and answering these important questions:

1. Assess the profi le and needs of your employees – do you have a spread of moderate or higher income or employees who value more choice and control?

2. Will your existing scheme allow you to meet the requirements for these employees?

3. Do you need to review your scheme to make it qualifying or do you need to set up a qualifying scheme?

4. Consider gradually increasing your existing qualifying scheme membership over the next four years. This will help avoid a sudden increase in costs due to auto-enrolment and compulsory contributions.

5. Does your current provider offer clear and concise member communications to help you do so?


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We’re here to help

Thank you for reading our guide to auto-enrolment and about the important changes now facing your organisation.

This guide provides a useful and informative overview of what needs to be done and when. But for a more detailed explanation of what auto-enrolment means for your organisation, IFS offer a free-of-charge presentation to yourself, heads of department or board of directors telling them all they need to know.

Having the correct scheme in place for auto-enrolment not only means you avoid some of the pitfalls, such as a penalty, but your staff feel more valued and you save time, money and effort in the long run.

At IFS, we offer a number of services to ensure both you and your workers get the best out of auto-enrolment. We take care of all the complexities from selecting the right scheme to communicating changes to workers.

We’ll advise you on what steps to take when - now and on an on-going basis. So don’t put it off - contact us today on 01243 432 430 or visit www.ifsnet.co.uk.

Auto-enrolment - its pays to prepare now.

Independent Financial SolutionsThe Old Flour Mill

Queen StreetEmsworth, PO10 7BT

T: 01243 432 430W: www.ifsnet.co.uk

Independent Financial Solutions is a trading name of DMJ Associates which is an appointed representative of Adviser Business Solutions Ltd,

which is authorised and regulated by the Financial Conduct Authority. Registered in England and Wales number 3749669

Employers Guide to Auto-Enrolment€¦ · employer, you have a pivotal role to play - starting now....

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