Pensions Automatic Enrolment

Transcription

1 Pensions Automatic Enrolment SURVIVAL GUIDE What it s all about, what it means for you and how you can deal with it.

2 Pensions Automatic Enrolment Pensions Automatic Enrolment has been introduced by the government as a way of addressing the problem of the large number of people in the UK who have made no pension provision. Automatic Enrolment will, as the name suggests, automatically enrol employees who either haven t bothered with or haven t currently got the option of enrolling onto an employer s pension scheme. For employers it brings with it the burden of: Increased costs More administrative obligations Deadlines to meet The threat of penalties for non-compliance During 2015/16 there are 153,000 employers due to fall under the legislation and this rises to 617,000 in 2016/17. Providers and advisors will come under increasing pressure to cope with the demand and so your sanity and survival during this period may depend on you taking early action. Pensions Automatic Enrolment will affect most business by April 2017, with many being affected much sooner. It will bring increased burdens so early preparation is essential. Pensions Automatic Enrolment Survival Guide 2

3 When will it affect my business or organisation? You need to understand what the Staging Date of your business or organisation will be, which will dictate when Pensions Automatic Enrolment will start and then be preparing to meet your obligations at least 6-12 months prior to that date. Large and medium sized businesses are already staged but the timescales for other businesses are: Smaller employers (30-49) 1st Aug st Oct 2015 Remaining employers (29 or less employees) 1st Jan st Apr 2017 To see what the Staging Date of your business or organisation will be you should visit Your staging date is the date your new responsibilities come into force for your business or organisation. Pensions Automatic Enrolment Survival Guide 3

4 What pension arrangements do I need to have in place? The government are backing the NEST pension scheme as the default option to use. However, you have an obligation to make the most appropriate arrangements for your staff and ideally this should be done in conjunction with a review from a pension s specialist. A properly established workplace pension scheme can be mutually beneficial for both you the employer and your employees. It is an opportunity to use pension provision as part of a strong benefits package for your employees and prospective employees. This should lead to loyalty and longevity of staff. To make the implementation and operation of your chosen pension scheme a straightforward exercise you will need an administration solution that is designed to integrate with your payroll processes. We have advisors available to give you a no-obligation indication of what your pension scheme options may be. Pensions Automatic Enrolment Survival Guide 4

5 What do I need to be telling my staff? Your employees need to be kept informed of the changes that will be taking place and be given the option to opt out of the arrangements. The Pensions Regulator provides guidance on what communication needs to be given to staff in order to advise them of the changes and of their options. That guidance can be viewed at employers/writing-to-staff-about-automatic-enrolment Once you reach your Staging Date, have the necessary pension arrangements in place and you have staff to automatically enrol, you must send their details to your pension provider to ensure active membership. You must then write to those enrolled staff to tell them they ve been automatically enrolled and that they have a right to opt out of the arrangements. You will also need to do this every time a staff member becomes eligible for automatic enrolment for the first time, or with any new starters who are eligible to be enrolled. You must write to your staff within one month of your Staging Date. Pensions Automatic Enrolment Survival Guide 5

6 What pension contributions will have to be paid? Pensions Automatic Enrolment brings with it minimum contribution levels for both the employer and employee/employer total contributions unless employees choose to opt out. As an employer you need to be aware of the additional costs that may arise. These can be seen in the table below: Minimum contribution levels Employer Total Staging date to 30/9/17 1% 2% 1/10/17 to 30/9/18 2% 5% 1/10/18 onwards 3% 8% Although the administrative aspects of Pensions Automatic Enrolment are burdensome, employers should not lose sight of the fact that from Staging Date they will have to contribute at least 1% of enrolled employees gross earnings into a pension scheme for them. The contribution costs falling on employers should not be underestimated and needs to be planned for ahead of the Staging Date. Pensions Automatic Enrolment Survival Guide 6

7 Can salary sacrifice arrangements be used to lessen the costs? Auto enrolment pension contributions can be made as straight deductions from employees pay. On the other hand by using a relatively simple Salary Sacrifice arrangement those costs can be reduced by effectively reducing tax and National Insurance on adjusted pay. Salary Sacrifice is a contractual agreement between the employee and the employer by which the employee agrees to forego salary in return for pension contributions by the employer (the amount sacrificed is paid into a pension scheme by the employer in respect of the employee). The key point is that the cost benefits are gained by a reduction in salary written into the contract of employment. When communicating the option of salary sacrifice to an employee, the employer needs to deal with this separately from the automatic enrolment information to avoid giving the impression that enrolment will only take place if the employee agrees to salary sacrifice. We can advise you on how salary sacrifice arrangements work and assist you in putting them in place if appropriate in order to minimise the costs of Automatic Enrolment. Pensions Automatic Enrolment Survival Guide 7

8 How can I deal with the Auto Enrolment administration? Pensions Automatic Enrolment administration is tightly linked to payroll processing and so a solution that combines the two will most likely be the most efficient for your business or organisation. Systems that split the payroll and auto enrolment functions are likely to lead to greater cost, greater administrative time, or both. Typically the combined payroll and administration process will comprise: Eligible employees are automatically enrolled into the pension scheme Opt-ins and opt-outs are managed Letters are sent to employees explaining the arrangements An audit trail of employee communications is maintained Employee and employer pension contributions are deducted from enrolled employees based on contribution rates and pay levels Payroll records are maintained for each qualifying pension scheme and employee Reports of contributions and scheme opt-ins and opt-outs are sent to the pension scheme providers We can show you how a combined payroll and automatic enrolment system will work and how little it will cost compared to time saved. Pensions Automatic Enrolment Survival Guide 8

9 Need Some Help? If you are responsible for bringing your business into compliance with the new Pensions Automatic Enrolment legislation, then we can help. We are one of the UK s leading payroll processing bureaus, processing around 1 million payslips every year. We can answer any questions you may have about Pensions Automatic Enrolment, and we can even do a lot of the work with you to make it easier to comply. If you have any questions, or would like help to comply with the new legislation, simply call and ask for Robin Mead. Alternatively, you can him directly at rmead@payplus.co.uk There s no obligation to buy and we ll be happy to help you understand what s involved to handle this new legislation for your business. Visit our dedicated Pensions Automatic Enrolment website for further guidance: ukpensionsautoenrolment.co.uk Pensions Automatic Enrolment Survival Guide 9

10 PAY plus About Payplus Payplus has been focused on providing top quality payroll services to small and medium sized businesses and organisations for over 40 years. Having successfully dealt with the introduction of Real Time Information, Payplus is now assisting clients with the implementation and management of the challenges brought about by Pensions Automatic Enrolment. Pensions Automatic Enrolment Survival Guide Copyright 2015 Payplus is a division of Virtual Business Source Ltd The Nexus Building, Broadway, Letchworth Garden City, Herts SG6 9BL