Auto enrolment pensions – be ready or risk fines (Guest blog)by
Small businesses employing fewer than 30 employees have just weeks to be ready for a June 1 deadline to comply with the UK government’s auto-enrolment pension regulations - or risk fines starting from £400.
The new rules, which are designed to encourage 10 million employees to save towards their retirement, are being rolled out in stages based on the size of a company’s workforce. Smaller employers with fewer than 30 staff are in the next tranche, which commences on June 1, when they will be legally obliged to enrol employees onto the scheme and to make a contribution towards their pensions.
Anecdotal evidence suggests that small and medium sized businesses are least likely to comply with the scheme – with some pensions experts saying that SMEs are putting off planning for auto enrolment until after May’s UK General Election.
However, these delays present a risk as the Pension Regulator is clamping down on businesses who fail to comply. From October to December 2014, the regulator issued 166 fines of £400 and 1,139 compliance notices to firms who were found to have been in breach.
The regulator is expected to keep a watchful eye on the 25,000 companies due to auto-enrol their employees this year and more than 500,000 in 2016. Regardless of their size, firms can be fined £400, with the possibility of further escalating fines.
Confusion still surrounds the initiative, which was launched in 2012, and although smaller businesses may not be equipped with the internal knowledge or resources to implement the new rules, they can’t afford to bury their heads in the sand.
Below are some key facts for SMEs to be aware of :
• SMEs who fall into the next stage of auto enrolment will have received a letter from the Pensions Regulator, which is sent 12 months ahead of the due start date and they need to have started the registration process already, otherwise fines may be due.
• Businesses should already be planning ahead for their ‘staging date’ and ensuring that they have all the necessary paperwork to complete their declaration of compliance.
• Compulsory employer contributions are the main costs associated with the pension scheme with businesses required to pay a minimum employer contribution for everyone they automatically enrol and anyone who opts in. The minimum amount is being phased in, starting at 1% and rising to 3% of staff’s qualifying earnings. Companies also need to be aware that pension solutions are not necessarily free and some of the large insurance companies will charge employers a service fee to have their pension scheme.
• Businesses should check with pension providers whether existing pensions for any employees will qualify for auto-enrolment as some may not.
• Small employers introducing a workplace pension for the first time should speak to an appropriate adviser who can help to identify a scheme best suited to their workforce.
The Pensions Regulator lists the ‘staging dates’ for the legislation and provides a useful step by step online guide to preparing for compliance www.thepensionsregulator.gov.uk/employers/planning-for-automatic-enrolment.aspx
For more information contact Barry Warne on 00 44 114 252 1437 or email firstname.lastname@example.org , alternatively please contact Erica Dietsch on 00 44 114 229 6557 or email email@example.com
By Barry Warne, partner and head of employment law at hlw Keeble Hawson and Erica Dietsch, independent financial adviser, Hawson Wealth Management Limited