Auto Enrolment and your obligations.
The reality of auto enrolment is that it will not be long before all employers large or small will be obligated to enrol their employees into an appropriate pension scheme.
The auto enrolment legislation is unwelcome for the average business another item of the ever increasing burden of compliance that business owners face but not only does it increase the administration but employers are required to contribute to a qualifying pension scheme for their employees.
How much are the contributions?
Employers must ensure the contribution made to the pension scheme is 8%, with the employer paying 3%. All eligible workers must be enrolled into a pension scheme that meets the auto enrolment criteria. Employers will also be required to maintain detailed and demanding compliance records.
What happens if I do not offer an auto enrolment pension scheme?
The pensions regulator has devised punitive measures to ensure that it is not cost effective to not comply with the auto enrolment legislation. If you deliberately or through ignorance not comply the regulator can impose a fixed penalty of £400. In addition the regulator can impose a daily penalty for non-compliance these are as follows.
Number of employees Prescribed daily rate (£)
50 – 249 2,500
250 – 499 5,000
As you can see the escalating fines mean that there is no incentive for an employer to pay a fine and not comply.
When will I need to start contributing to an auto enrolment pension scheme?
This individual to the size of the company and when the pension regulator received information relating to the number of employees you have. The only way of making sure of your staging date is to visit the pension regulators website and input your PAYE code this will provide you with your individual staging date.
How long does it take to set up an auto enrolment pension scheme?
The pension regulator has indicated that you should start the process as soon as possible and that they will be contacting employers twelve months before the staging date. Spectrum Wealth Management are supported by professionals who deal with employee benefits and as such we are able to assist you through the process and can help manage the timescales required to set up a qualifying scheme. It however is not advisable to leave it to the last minute as this is unlikely to be a good enough excuse if you miss your staging date.
My accountant will sort this out for us?
There are many accountants who are helping employers comply with this legislation sadly most accountants have under estimated the full impact of auto enrolment we have spoken to many accountants who are not prepared for the on-going support and after sales care necessary to deliver auto enrolment compliance. Many of these accountants are not able to setup the actual pension scheme this is referred to a third party for advice such as an independent financial advisor like ourselves.
Accountants are in a very difficult situation having received very little support but also payroll functions are not fully equipped to deal with the auto enrolment legislation and reporting regime even the most advanced payroll system is not ready.
So in summary Spectrum Wealth Management are under no illusion how unwelcome auto enrolment legislation is but we are well placed to help you and your accountant deliver a cost conscious, compliant future proofed auto enrolment scheme which delivers on the legislation and provides after sales support delivered by employee benefit experts.