Don’t panic about your pensions auto-enrolment responsibilities, just a little planning ahead will keep you right!
If you’re running a small business, the chances are you will have heard from the Pensions Regulator by now about your staging date for auto-enrolment. Although SMEs have been given extra leeway, the time is now fast approaching when you’ll need to spring into action. The process starts by nominating a primary point of contact (usually a partner, director or someone else in a senior position) and a secondary contact who’ll handle the day-to-day operation of the scheme.
10 Steps For Setting Up Auto-enrolment
Here’s your 10-point action plan, which should see you through the initial process and ongoing administration:
- Define and set-up your scheme.
- Assess your workforce for eligibility.
- Send letters to all your workers, providing details of the scheme, the contributions that will be made and the start date.
- Enrol all workers into scheme.
- Manage opt-outs and timely refunds and make sure you process any employees wishing to opt in, join, or opt out.
- Enrol new starters as well as postponements.
- Continuously calculate, pay and monitor contributions.
- Complete an auto-enrolment declaration of compliance, within five months of staging date.
- Keep up-to-date records.
- Re-enrol all eligible job holders every three years.
Eligible, Non-Eligible, Opting in and Employer Contributions
To be eligible in the eyes of the Regulator, an employee must be auto-enrolled if they're over 22, but under the state pension age (this is currently 65 but is reviewed annually by the DWP), and earn more than £10,000 per year. You must make an employer contribution for these employees.
It is possible for other employees to choose to join the scheme and for whom, as an employer, you'll be required to make contributions. These are:
- Employees aged between 16 and 74, earning more than £5,824 (tax year 2015/16) a year but less than £10,000. These employees aren't eligible but can opt in.
- Employees aged under 21 years or who are over the state pension age and earn more than £10,000. Again, these employees aren't eligible for auto-enrolment - but they can opt in.
There are some employees who aren't eligible for auto-enrolment, but they can opt in. As an employer you are not required to make a contribution. These are:
- Employees earning less than £5,824 (tax year 2015/16) a year, aged between 16 and 74. These employees aren't eligible for auto-enrolment, but they can opt in.
Dates and Deadlines - Take Action
Whatever your own situation, if you haven't got around to it, first check to find out your staging date.
Whatever the situation, if you haven't taken action yet, do so as soon as you can. Employers must complete a Declaration of Compliance within 5 months of their staging date so the regulator can be assured you've met your auto-enrolment obligations. You might not know, but the fixed penalty fine for missing the deadline for declaring compliance starts at £400 - and it increases significantly for more protracted delays in completion.
Are You a Smooth Operator?
One of the biggest setbacks to your scheme getting off the ground smoothly can be incomplete or inaccurate payroll information. It goes without saying that you should have 100% accurate and up to date payroll data at any time but, auto-enrolment adds a new complexity to this fundamental requirement of any business. The accuracy and completeness of your payroll data is key to a successful auto-enrolment implementation.
Your accountant can be a huge help with navigating this really important change to workplace pensions so find out exactly what support and advice they’re able to give you and get auto-enrolment embedded in your business. It's not too late!