New workplace pension schemes, already required by law at larger companies, will soon be imposed on smaller businesses too.
I’d bet my life’s savings, one subject that hasn’t popped into your head is pensions. But if you own or work for a business that has two or more employees, you do need to give pensions some head space. If you’re an employer, you also need to be making a plan of action.
That’s because the duty of employers to establish auto-enrolment workplace pension schemes, under the 2008 Pensions Act, is now firmly with us. These schemes have been introduced first at companies with the highest numbers of employees, and are being phased-in between now and 2018 at businesses with lower numbers on their payrolls. If auto-enrolment workplace pensions haven’t reached your company yet, they soon will.
To briefly recap, employers will be required to automatically enrol into a workplace pension scheme any member of staff who earns £10,000 or more per year, who is aged 22 or over, and who is under the state pension age.
Other workers who are not enrolled automatically have the right to enrol voluntarily and all employees will have the right to opt-out. The minimum contribution to the workplace pension fund is 2% of an employee’s pay, with 1% paid by the employee and 1% by the employer. Employees can opt to make additional voluntary contributions.
The deadline by which your company must implement its workplace pension scheme is known as the staging date. You can check this by visiting the Pensions Regulator website and entering your company’s PAYE reference number.
If that date seems some way off, be careful not to be lulled into a false sense of security – which brings me to three short pieces of advice I’d like to share with you about staging dates, drawing on our expertise and experience.
The first thing worth knowing is that many businesses have found it takes considerably longer to prepare for auto-enrolment than they anticipated. Start detailed planning early, at least 12 months before your staging date.
Assistance is available with the implementation and administration of your scheme and the Pensions Regulator recommends employers make arrangements with a pension provider and software provider six months before staging date.
My second piece of insider’s knowledge is that some employers have found the service offered by some pension scheme providers has fallen short of their expectations, with costs that are difficult to understand.
My third and perhaps most surprising piece of advice is this: think the unthinkable and seriously consider initiating a workplace pension scheme sooner than the staging date.
Some businesses are already doing this, to align with other business practice, such as the start of their financial year, or to improve worker loyalty and retention by demonstrating fair working conditions and assisting employees with saving for the future.
Mike Jenkins is business development manager at Welplan Pensions