Top ten tips for successful pensions automatic enrolment
Wednesday 17th December 2014
The Government wants all workers to be able to save into a pension scheme for their retirement.
By 1 February 2018 all employers must automatically put current workers and new joiners into a pension scheme and pay contributions. Here are the top ten tips to help you, the smaller construction employers, understand and comply with the automatic enrolment requirements.
1. Know your staging date. Automatic enrolment is being phased in starting with the largest employers. Employers with 60 workers have a staging date of 1 October 2014. Check your staging date by entering your PAYE reference number on the following website: http://www.thepensionsregulator.gov.uk/employers/tools/staging-date.aspx
2. Understand what you need to do. Remember that workers have the right to opt-out of the scheme but only after they have been put into the scheme. You must not do anything to encourage them to opt-out.
3. You need to start planning early. Don’t underestimate the amount of time it will take to comply with automatic enrolment. The main compliance challenges are practical and administrative. You should put an action plan in place and allow at least six months to prepare for your staging date.
4. Understand how your workforce is affected. You may have different responsibilities to different sections of your workforce. Automatic enrolment applies to “workers”, not just employees, and the definition is wide enough to include some fixed-term contract workers, agency workers (depending on who pays the worker) and offshore workers. Existing workers and new joiners only have to be enrolled, however, if they are between age 22 and state pension age and if their earnings are £10,000 or more a year (£192 per week). Other workers may be able to opt-in.
5. Understand what pension (if any) and payroll arrangements (internal or outsourced) you have. If you do not already have a pension scheme, you will need to put a scheme in place. Nest (National Employment Savings Trust) is available to provide a compliant scheme if you struggle to find another provider. You must also ensure that your payroll arrangements are compliant and can identify when workers must to automatically enrolled.
6. Decide how you want to comply with auto-enrolment. Do you want to take a “minimum compliance” approach and pay the default minimum contributions (currently 1% for employer and members) and only enrol eligible jobholders? Do you want to maintain the existing contributions and arrangement (which may be more generous) if they meet the auto-enrolment requirements?
7. Communicate clearly with your workforce in writing (this can be by email). There is a lot of information which you need to give to your workers. The Pensions Regulator has templates to help employers comply (http://www.thepensionsregulator.gov.uk/employers/letter-templates-for-employers.aspx).
8. Remember to register your scheme with the Pensions Regulator within four months of your staging date. Maintain a clear and accurate record of your ongoing auto-enrolment compliance. The Pensions Regulator can impose escalating penalties for non-compliance with automatic enrolment.
9. Help is at hand. The Pensions Regulator provides useful guidance for employers (http://www.thepensionsregulator.gov.uk/automatic-enrolment.aspx). Your current advisers may also be able to help. There are also a number of specialist consultants who can advise on auto-enrolment compliance.
10. Finally, remember that getting past your staging date is not the end of the story. You must continually monitor your workforce to ensure automatic enrolment compliance. Don’t forget that every three years you will need to undertake a re-enrolment exercise.