Pensions: are you ready for auto-enrolment?
According to the CIPD, auto-enrolment has been labelled one of the “top 10 headaches for employers”.
With the new requirements eventually applying to all UK employers, it is really important to try to get to grips with the changes.
This short guide has been developed to address some of the questions employers frequently ask us on the new auto-enrolment rules.
Q: When will we be affected by auto-enrolment?
A: The Department for Work and Pensions has developed a “staging” timetable for all UK employers running to February 2018. Once employers reach their staging date, the new rules will apply automatically. Generally speaking, your staging date is based on the number of eligible workers in your PAYE scheme as at April 2012. As an example, businesses with between 50 to 249 employees will have a staging date between 1 April 2014 and 1 April 2015.
Q: What happens once we are covered by auto-enrolment?
A: Once an employer is covered by the new duties, it will be required to auto-enrol specific types of workers in a qualifying pension scheme. Workers can opt out of the pension scheme they have been enrolled in, but if they do not then employers and workers will be obliged to pay minimum pension contributions into the scheme.
Q: What sort of pension scheme should we use?
A: Employers must auto-enrol their workers onto a “qualifying” pension scheme. The pension scheme must meet several requirements about the quality of benefits, the level of contributions payable and contain no eligibility restrictions. Your existing scheme may meet the auto-enrolment requirements.
Q: Who must be auto-enrolled into the scheme?
A: All workers who qualify as “eligible jobholders” must be enrolled within one month of their auto-enrolment date. The definition of a worker covers permanent and temporary employees as well as contract and agency workers. Self-employed individuals, consultants or casual workers may or may not be caught depending on the circumstances. To qualify as an eligible jobholder, the worker must ordinarily work in the UK, be aged between 22 years old and state pension age and be paid above the earnings trigger (currently £9,440).
Q: What about workers who are not entitled to be auto-enrolled?
A: Some workers who are not entitled to be auto-enrolled can still request to join your pension scheme. Depending on their age and level of earnings, you may need to enrol them in a qualifying pension scheme and make contributions.
Q: Will we need to consult with our employees?
A: If you need to change contracts of employment (see below) then you would need to consult with employees. Further, there may be an obligation to consult for a 60 day period under existing pensions legislation. Whether you are obliged to consult with employees or not, you should carefully communicate your pension changes to your employees, so that they can make informed decisions about their retirement.
Q: Will we need to amend our contracts of employment?
A: An employee’s contract of employment must provide basic information about an employee’s pension rights and the current pension schemes in place. As such, you may need to amend existing contracts of employment depending on what your contracts of employment currently say, and what changes you may be making as a result of auto-enrolment.
For further advice on how to manage auto-enrolment, you are welcome to attend the free seminar Withy King will be hosting with Fidelius Employee Benefits at our Midland Bridge office in Bath on 25 September 2013.
Among other things, Fidelius will be providing practical information and tips on issues surrounding pensions, including:
- Whether you can use your existing pension scheme for auto-enrolment
- How your payroll will cope with auto-enrolment
- Whether your current scheme contribution levels meet the auto-enrolment requirements
- Auto-enrolment financial impact assessments, and
- How salary sacrifice could help with the cost of auto-enrolment.
For more information, or to book a place, log on to www.withyking.co.uk/news.php?id=future-proof-your-business-planning-for-and-retirement