Small Business Workplace Pensions And Auto Enrolment
The National Association of Pension Funds says automatic enrolment has changed the UK workplace forever. However small an employer is, it certainly cannot afford to ignore the changes it is bringing about. Unfortunately though, preparing for pensions automatic enrolment is not a straightforward business.
For the first time, employers are now obliged to pay into pensions unless employees opt out after being automatically enrolled. If you already provide a pension scheme then the number of members is likely to increase.
This brings new duties and administration on top of additional costs. You will need to communicate changes to employees, deal with pension providers and satisfy the regulator that you are meeting its requirements.
Auto enrolment is certainly not something to be left to the last minute. The regulator recommends a company starts planning at least 12 months before the staging date. This is due to the significant amount of preparation involved in assessing your workforce and ensuring the appropriate pension arrangements are in place.
How can Kirk Rice help?
Kirk Rice’s experience in the pensions markets means we take the headaches of auto enrolment away from you. Not only will we help you manage the road to automatic enrolment – we will make sure your scheme is set up and remains fully compliant.
There are many decisions to be made, with potential pitfalls at every stage. The Pensions Regulator has produced detailed guidance, and pension providers can help to some extent. Yet many companies value the expertise of an adviser who can look at their particular circumstances and recommend the best solution.
We are also up-to-date with the latest auto enrolment developments, so we empower your company to make informed decisions.
Auto enrolment FAQs
What is automatic enrolment?
Auto enrolment was set up by the pension regulator to make sure all employees get access to a pension scheme. Therefore, it has been made compulsory for employers to automatically enrol eligible workers into a pension scheme.
What if we already have a pension scheme in place?
If you already have a scheme in place, it is still likely that you will need to make some changes. You need to ask:
- Is your existing scheme already compliant?
- Has the scheme achieved 85% take up?
- Could the administration be handled more effectively?
- Are you comfortable that you can handle enquiries from The Pension Regulator?
- Is the scheme good enough for you and your staff?
- Have you already missed your auto enrolment date?
Who is affected by auto enrolment?
You are affected by auto enrolment if you are one of the following:
- Employer
- Business owner
- Financial director
- Payroll provider
- Accountant
- Bookkeeper
- Employment agency
What are your compliance obligations under auto enrolment?
Auto enrolment isn’t just about running payroll assessment, issuing letters and maintaining records. Each employer must have one or more ‘qualifying’ pension schemes. These qualifying schemes must include a formal agreement that the employer will pay at least the minimum contributions, as well as pass on employee contributions. What’s more, employees who are automatically enrolled must not be forced to make decisions – so there must be a suitable default investment option in place.
Since April 2015 there has also been maximum charge for members equivalent to 0.75% of the value each year.
How do we choose the right pension scheme?
Kirk Rice can help any employers look at the options to ensure auto enrolment requirements are met. These might include:
1. Setting up a new in-house scheme (or bringing an existing in-house scheme up to date)
In-house schemes can be tailored to the requirements of the company and its staff. Most companies choose a scheme run by a pension provider because the provider deals with most of the administration. They are commonly used in order to provide highly flexible pensions for high-earning directors and employees of smaller companies.
2. Implementing a group personal pension (GPP) scheme under a contractual arrangement
GPPs are generally run by large insurance companies and offer a wide range of investment options. The insurance company often provides support in setting up and communicating your pension arrangements, generally with the help of a financial adviser. Although you make the arrangements, each employee has their own contract with the provider and can continue paying in if they leave your company.
3. Setting up a master trust scheme to cover employees across a number of employers
Master trusts are similar to in-house schemes, but cover many companies and are administered centrally. Some master trusts have been set up specially to provide a simple, low-cost option for automatic enrolment. These include the National Employment Savings Trust (NEST). NEST was established by the government to ensure that every employer has access to at least one pension scheme.
4. Use a combination of different schemes
A combination of different schemes may be appropriate for some employers. For example, it might be appropriate to enrol some staff in a master trust scheme, while more senior employees could be better served by a more extensive choice by a GPP or a small self-administered scheme (SSAS) for directors.
Workplace Pensions And Auto Enrolment Key Guide |
Kirk Rice LLP is authorised and regulated by the Financial Conduct Authority (www.fca.org.uk/register). FCA Registration No: 531538.
Kirk Rice LLP is a limited liability partnership registered in England & Wales (Registered Number: OC354936) and having its registered office at The Courtyard, High Street, Ascot, Berkshire, SL5 7HP.
Scenarios
Designing A Company Pension Scheme
How long do you need and how much will you charge to set up Workplace Pension Scheme?
Mr B.W
