Why you should be thinking about Automatic Enrolment

Why you should be thinking about Automatic Enrolment

All employers are required to enrol employees into a workplace pension scheme. There are no excuses and every business is affected by this. Depending on the size of your business the deadline for enrolment differs.

Automatic enrolment has been slowly introduced since 2012 with the last date for auto enrolment on the 1st of February 2018.

It is important that you find out when the staging date for you company is well in advance. At the moment the Pensions Regulator is finding that on average it is taking companies between six months to a year to set up a work place pension scheme and many Directors have vastly underestimated the amount of work and time involved.

To find out when your auto enrolment date is visit the pension regulator website.

Choose your Pension Scheme Provider

One of the key decisions you need to make before your auto enrolment date is which pension scheme provider to use.

The Government has set up a pension scheme called the National Employment Savings Trust (Nest). This has been set up specifically as an option for auto enrolment. However just because it has been set up with auto-enrolment is mind doesn’t necessarily mean that it is the best option for your business.

Once you have found out your enrolment date about a year before it comes into force start doing research on the pension providers. Don’t forget they will be very busy as lot of businesses like yours will be going through the same process at the same time!

Which of my employees are eligible to join the scheme?

Depending on the age and earnings of your employees each member of staff either has the right to opt in to the scheme or has to be automatically enrolled.

Table to show the rights of each type of employee

SPA – State pension age

Monthly Earnings Age
16 – 21 21 – SPA SPA – 74
< £481 Right to join a pension scheme
£481 – £833 Right to opt in
> £833 Right to opt in Automatically enrolled Right to opt in

What are the Minimum Contributions to the Pension Scheme?

There are different minimum contributions for employers and employees. Over the next few years the minimum contributions will slowly increase to a minimum of 3% for employers and 5% for employees from 1st of October 2018 onwards.

Date Employer Minimum Contribution Employee Minimum Contribution
Before 30/09/2017 1% 1%
1/10/2017 – 30/09/2018 2% 3%
1/10/2018 onwards 3% 5%

The amounts above are minimum contributions and you can decide to make higher contributions if you wish.

What you need to do on and after your Staging Date

Once you have chosen your pension provider at your staging date you need to identify which members of your staff qualify for automatic enrolment and who can opt in to join the scheme.

You must inform all the staff about the scheme and how automatic enrolment affects them. Again the pension regulator has some helpful template letters that you can send out to your staff.

What do I do Now?

If you have a quick five minutes visit the pension regulator website and work out when the staging date for your business is. You can then begin to research pension providers so by the time your auto enrolment date comes up you are ready to go.

Xero certified Accountant and ICAEW Chartered Accountant

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