Pension Auto-Enrolment has
finally arrived! The first tranche of employers have already complied with the
inaugural 1st October 2012 staging date. Their auto-enrolment schemes
went ‘live’ on this date.
Stakeholder pensions introduced
by the government in October 2001 did not work. Thousands of designated schemes
are receiving no contributions from employer or employee. Employers who did not
designate a Stakeholder were not fined.
Auto-enrolment will be very
different. The government is on a mission to promote pensions in the workplace.
It has proved difficult to avoid the face or voice of Theo Paphitis over the
last few weeks!
This time, there will be minimum
employer contributions, and there will be hefty fines for employers not
meeting their staging dates or not fulfilling their duties.
This list, though not exhaustive,
gives an indication of the burden placed on employers:
- Assess the workforce to identify the different categories under auto-enrolment
- Three categories: eligible jobholder; non-eligible jobholder; entitled worker
- This enables calculation of the cost to the company in pension contributions
- Decide whether to ‘phase in’ contributions
- Decide whether to offer salary exchange
- Decide whether to deploy temporary ‘postponement’
- Establish a pension scheme that complies with auto-enrolment regulations
- If a pension scheme is already in place, can it, or should it be adopted for auto enrolment?
- Communicate with each worker on a category specific basis
- Once identified, immediately enrol ‘eligible jobholders’
- Immediately enrol ‘opt-ins’
- Establish robust administration, payroll and compliance procedures and systems
- Manage the opt-outs, opt-ins, refunds and re-enrolment process
- Register the scheme with The Pensions Regulator
- Maintain records and a compliance audit trail for possible inspection by the Regulator
- Continually assess the workforce to identify changes to a worker’s category/rights
What is an eligible jobholder?
A UK worker aged between 22 and
State Pension Age – earning £8,105 or above (2012/13)
Minimum employer contributions?
The simple answer is that,
regardless of workforce size, an employer must a minimum 3% of an employee’s
gross earnings between £5,564 and £42,475 (2012/13). Phasing in of
contributions is available over a 5/6 year period.
Cost to the employer
It is widely accepted that the
cost of putting the necessary people, systems and procedures in place will for
many smaller employers outweigh the cost of employer contributions.
Employer reaction
The majority of employers we are
talking to have no appetite for taking on the processes listed above. They are
too busy with the daily pressures of trying to maintain profit and cash flow in
these difficult times for trading.
How can we help?
Ward Williams Financial Services
Ltd is the financial services division of Ward Williams Chartered Accountants.
As such, we help their corporate
clients establish efficiently run pension schemes. The increased level of
processing, monitoring and payroll functionality required is going to test even
the most efficiently run businesses. Working alongside accountants gives us
valuable access to knowledge and experience in these areas, particularly
payroll.
Let us take the strain for you, so that you can get on with running your
business.
Contact Paul Nathan at Ward Williams Financial Services:
01932 830664 / 01895 236335
