AUTOENROLMENT, THE NEXT BIG CHALLENGE FOR EMPLOYERS!

The government’s new auto enrolment pension strategy is now up and running although it won’t become mandatory for the majority of owner managed businesses until 2014 and 2015 (check your staging date for confirmation of the exact timing).

So what is it all about? —well essentially it is a mandatory pension scheme designed to persuade employees to save for their retirement. All employers will have to provide a company pension scheme to which both they and their employees will be required to contribute. The level of contributions will be phased in over a number of years but when it is fully operational, employers will have to contribute 3% and employees 5% of gross pay.

The 2 main issues facing employers are:

1.  Establishing a company pension scheme that complies with the government’s criteria. There is talk in the pension industry that that there will not be sufficient capacity to cater for all businesses in the UK. The government has set up a back up pension scheme called NEST which will be available for anyone who is unable to source their own pension scheme but NEST will be operated by the Indian conglomerate Tata on behalf of the government and not everyone will feel comfortable in trusting their hard earned savings to some distant Indian operation?—so it may be an idea to start looking at establishing your own company pension scheme sooner rather than later in order to ensure that you are able to choose a pension provider that you are comfortable with.

2. Administration of the auto enrolment process—-operating the auto enrolment system has the look of an administrative nightmare. It is involved and complicated and there is a system of fines and penalties to ensure that employers comply. Essentially, all employees that fall into the required criteria (aged 22 and earning over £9,440 per annum) have to be enrolled in the pension scheme. They then have the choice to opt out. The employer then has to make sure that anyone who subsequently meets the required criteria has to be enrolled into the scheme. They also have the choice of opting out. On a periodic basis, all employees have to be auto enrolled into the scheme, with the choice of opting out. All of the enrolling and opting out has to be recorded with formal letters and information needing to be issued to employees. It is clear therefore that employees will need to keep detailed records and have a system for monitoring and implementing the process

So the message is fairly clear: 1. Do not leave it too late before you begin the process of establishing your company pension scheme.

2.Make sure that you have robust administrative procedures in place to operate the auto enrolment process.

At Balance Accountants, our payroll department is already geared up to operate the new process on behalf of our existing payroll clients and we expect that a significant number of other clients will approach us to take on their payroll processing when the new system is implemented.

We also have access to financial advisers who can help set up the required company pension scheme for you.

If you would like further information or advice then please feel free to call us. Don’t leave it until the last minute!

0 Responses to “AUTOENROLMENT, THE NEXT BIG CHALLENGE FOR EMPLOYERS!”


  • No Comments

Leave a Reply




Download the latest Balance Business Bitesize now!

Enter your e-mail and name now to learn how you can do the above

E-mail: 
Name:

Subscribe!