In the next three years, 1.3 Million employers* will need to establish pension schemes and declare compliance with The Pensions Regulator, (TPR).
Although Auto-Enrolment has dropped off the news agenda recently, it is still ongoing, with more and more employers being contacted by The Pensions Regulator, (TPR), at the 12 months point before their statutory staging date. This financial year 150,000 employers will get to their staging dates and ignoring it is not an option!
The Pensions Regulator has teeth and is now starting to use them. To date, formal compliance has been over 99%, but to the end of December 2014, some 169 £400 fixed penalty notices have been sent out and 1,316 compliance notices have been served.
For a small employer coming up to their staging date the dominant message from The Pensions Regulator is start early and prepare well. (http://www.thepensionsregulator.gov.uk/docs/automatic-enrolment-use-of-powers-december-2014.pdf). Our personal experience is that record keeping, rather than the pension scheme choice is the real thief of time and resources.
For someone hoping to get their business on the right foot before Auto-Enrolment, please establish the following:-
1. Get a full name, postal address, date of birth and National Insurance number for every employee, director or person whose status you are unsure of but they get paid by the company.
2. Get a private and business e-mail for all employees, directors and other people paid by the company for services rendered.
3. Ensure you have an employment contact or statement of particulars or other commercial agreement to pay anyone on a regular basis. Get any arrangements in writing, so you and they know what should be done and how much it is worth.
4. Make sure your payroll system is up to date and can cope with both RTI, (Real Time Information) and pension deductions from the payroll. It is highly likely that any mainly manual system will become too cumbersome to operate, once auto-enrolment is running.
5. Make sure your payroll and HR paperwork is accessible, understandable and up to date. This and items 1, 2 and 3 are likely to be overlapping, so make sure you can keep everything up to date with the least effort possible.
6. Make a decision early whether to do it all yourself or pay someone to do it for you. Sorting out 1-5 in advance will reduce the bills if you pay someone else.
7. Make sure your accounting processes can cope with direct debits to pension companies after the money has been deducted from payroll. Your book keeper needs to be able to cope with control accounts and reconciliations. Missing or late payments are a statutory offence.
Once in place, Auto-Enrolment will put about 5% on your cost base. If this is unsustainable, now is the time to look to restructure, make redundancies or liquidate the business as trying to ignore it will only make things worse. Using salary sacrifice or paying pension contributions rather than a salary increase could do a lot to keep the costs in check, but if you want to go down that road, start early and use an adviser.
If you would like to know more about how we can help you plan and realise your financial goals then contact us at firstname.lastname@example.org or call us on 01223 792 196.
The information contained is for guidance only and does not constitute financial advice. It is based on our understanding of UK legislation, whether proposed or in force, and market practice at the time of writing. Levels, bases and reliefs from taxation may be subject to change. Accordingly no responsibility can be assumed by Martin-Redman Partners its officers or employees, for any loss in connection with the content hereof and any such action or inaction.
*1 TPR’s Commentary and analysis: April 2013 - March 2014, published in July 2014, and other documents on the TPR website.