There’s a lot of publicity and hype at the moment with regards to Workplace Pensions, sometimes also known as Auto-Enrolment, with a TV advert that stars familiar faces such as former Dragons Den star Theo Paphitis as well as The Apprentice’s Karen Brady and Nick Hewer all saying “I’m in” or “We’re all in”.
So what is Workplace Pension Reform/Auto Enrolment?
You’ll probably be familiar with the concept of starting a new job and, after a period of time, having the opportunity to join the company pension fund. Well, it’s about to be turned completely on its head.
Starting from October 2012 every employer in the UK will be required to provide employees access to a workplace pension scheme, automatically enrolling them into this scheme whilst also being responsible for making a contribution to their employees’ pension fund.
Why are the government introducing this?
The UK has an ageing population and with people living longer the government has concerns that not enough people are saving for their future retirement aspirations. Workplace Pension Reforms will enable employees to start saving but all the responsibility, time and resource will be with the employer to comply.
So when does this impact my business?
Starting with large employers, over six years, businesses start getting ready and compliant. Employers will be issued with a date they must start compliance with Workplace Pension reforms. This is known as their ‘Staging Date’.
The great news for micro and small businesses is that you still have plenty of time to prepare, with employers with 30 employees or less starting to be phased in from 1 June 2015… but that doesn’t mean you should leave it to the last minute.
You can check your ‘Staging Date’ on www.thepensionsregulator.gov.uk/employers/staging-date-timeline.aspx
So what are my responsibilities as an employer?
Once you know when your business must comply, you’ll need to carry out an assessment on your employees (or ‘Workers’) to determine whether they are an ‘Eligible Jobholder’ who must be automatically enrolled in to your pension scheme, or an ‘Non-Eligible Jobholder’ who have a right to opt in or those who are ‘Entitled Workers’ who have a right to join.
Following this you’ll need to either check that your existing pension scheme (if indeed you have one) meets the criteria for a qualifying pension scheme, or alternatively you must find one. It’s then going to be your responsibility as an employer to communicate to your employees to explain what Auto Enrolment is and what it means to them to be automatically enrolled.
Once you have automatically enrolled those employees that meet the right criteria, you’ll need to register with The Pensions Regulator, communicating and sharing specific information with them whilst keep records for up to 6 years. The employee is free to choose whether they remain opted in, or whether they wish to opt out.
Oh I and almost forgot… it’s also your responsibility to make a minimum contribution to your employees’ pension. It will start at 1% and over time will increase to 3% by 2018.
It sounds quite simple….doesn’t it?
Well I’ve got over 15 years of payroll experience and it’s taken a lot reading and absorbing the guidance and this is why I urge you to put aside sometime and get yourself prepared.
The Pensions Regulator Authority, whose job it is to raise employers’ awareness of their legal duties and how to comply, have broken it down into 7 steps to prepare for Auto Enrolment.