auto-enrolment

Upcoming changes to the pensions auto-enrolment regime

The government has decided that the earnings trigger will remain at £10,000 for the tax year 2018/19, following its annual review of the automatic enrolment earnings trigger. Whilst that is staying the same, other parts of the pensions auto-enrolment regime will change. Here’s a run-down of the key points:

  • The qualifying earnings band is set to increase. This sets minimum contribution levels for money purchase pension schemes. The minimum of the band also confirms who can opt in to a workplace pension scheme if they earn less than the earnings trigger. The earnings band will continue to be aligned with National Insurance contribution rates for tax year 2018/19.
  • This means that the lower limit of the qualifying earnings band will increase from £5,876 to £6,032 and the upper limit of the qualifying earnings band will increase from £45,000 to £46,350.
  • From 6 April 2018, employers may be required to increase the amount of their contributions into their auto-enrolment pension scheme. Workers will have to make up whatever shortfall remains of the new total minimum contribution.
  • Currently, the employer’s minimum contribution is 1%. This will increase to 2% on 6 April 2018 and then to 3% on 6 April 2019.
  • The worker’s minimum contribution is currently 1%. This will increase to 3% on 6 April 2018 and then to 5% on 6 April 2019.
  • The total minimum contribution is currently 2% but will increase to 5% on 6 April 2018 and then to 8% on 6 April 2019.

Additionally:

  • If the employer pays the same as the minimum total contribution then the worker will not need to pay any contributions, unless the scheme rules require a contribution.
  • If the employer contributes more than their required minimum amount but less than the total minimum amount, then the worker only needs to make up the shortfall between the total minimum and the employer contribution.
  • All auto-enrolment pension schemes with contribution rates that would be below the minimum amount after the rate increases must apply the higher rates to remain a qualifying scheme.

During 2017, the Government conducted a review of automatic enrolment to consider how they could encourage more people to save into a workplace pension. You can read it here.

The report sets out the government’s plans to lower the age at which employers are required to auto-enrol employees into a workplace pension scheme from age 22 to 18.

Fortunately for employers, the government intends that these changes will not take effect until the mid-2020s.

We’ll keep you updated as the changes roll out. In the meantime, you can contact Alison for expert HR advice here.

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Automatic enrolment – what do Business Advisers need to do?

The latest Compliance and Enforcement bulletin released by The Pensions Regulator has highlighted their concerns with the number of employers who are ignoring workplace pension duties, putting them at risk of being fined and prosecuted for failure to comply.

Their latest data shows that their use of fixed penalty notices (FPNs) and escalating penalty notices (EPNs) has increased. The Pensions Regulator now publishes the details of those who have paid their EPNs but remain non-compliant on their website. They are also publishing the details of those who failed to pay their EPN and have been made subject to a court order. This public reporting of businesses failing to pay their notices is a huge incentive for all advisors to stay on top of their workplace pension duties.

What is automatic enrolment?

Every employer with at least one member of staff has a duty to enrol those who are eligible into a workplace pension scheme and contributing towards it. It is automatic for staff but not for employers.

What do Business Advisers need to do?

An adviser’s role depends on the type of adviser they are. They may be expected to simply provide advice or may offer a full automatic enrolment service. When it comes to legal responsibility for automatic enrolment, the legalities lie with employers. However it is likely that they will turn to Business Advisers for help. An adviser who is nominated as a client’s additional contact to The Pensions Regulator will receive regular emails with the latest information and deadlines required of your contact.

Who has to be compliant?

Accountants and Business Advisers should encourage all clients, including smaller employers and non-payroll, to comply with their new employer duties. If a client has at least one member of staff who is paid via a PAYE scheme, automatic enrolment duties apply. There is a duties checker tool available for clients to work out how automatic enrolment applies to them, available here.

What needs to be done to set up automatic enrolment?

  • 12 months before staging : checking your client’s staging date, being a point of contact and checking who to enrol.
  • 6 months before staging : working out your client’s costs, checking records and payroll processes, choosing a pension scheme.
  • On your client’s staging date : assessing and enrolling staff, writing to your client’s staff, knowing your client’s ongoing duties.
  • After your client’s staging date : completing the declaration of compliance.

In a nutshell

A Business Adviser can offer as much or as little support for clients organising their workplace pension scheme enrolment. However it is very likely that they will be asked to provide help and some services. It is important to keep up to date with The Pensions Regulator deadlines and ensure you are able to offer advice regarding automatic enrolment.

For more information, visit http://79.170.40.162/enlightenhr.com or contact Alison Benney:

alison@enlightenhr.com

Tel: 01803 469466 Mobile: 07967221595

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Auto-enrolment is coming… what do you need to know?

For many business owners it can be a daily struggle, keeping on top of the changing requirements and regulations concerning their employees.  And the introduction of the new auto-enrolment pension scheme policy has added even more pressure.

What is auto-enrolment?

As of 1st October 2012 all employers are required to automatically enrol workers into a workplace pension scheme.  This is designed to combat the worry that few UK workers save enough for their retirement.  So why haven’t you done anything yet?  Don’t worry.  Auto-enrolment is being phased in over a six-year period, from 2012 to 2018, starting with the large employers.  For many smaller business this, only now, is becoming a reality.

To be considered ‘eligible’ for this scheme your employees must be between 21 and state pension age, earn the equivalent of £9,440 or more a year and work in the UK.  These ‘eligible jobholders’ MUST be entered into the scheme.  If someone is aged between 16 and 75 and earning between £5,668 and £9,439 then they must be told about their right to enter the scheme and given the option to join, should they wish.

In both of these cases the employer pays a percentage of what is called ‘qualifying earnings’.  These are the earnings the employee makes between £5,669 and £41,450.  In the first few years these seem set at 1% but could go up to 3% with time.  The employee would then match this.

If they are aged between 16 and 75 and earning less than £5,668 then they still need to given the option to join the scheme but they have to pay the contributions entirely.

Our five need to know points about auto-enrolment.

1. Staging – Each employer has been allocated a staging date.  This is the date by which you need to be compliant.  You can find out your staging date by clicking here.
2. Get moving – This is something you need to start looking at least six-twelve months before your staging date as there’ll be a mad panic at the end as hundreds of companies leave it to the last minute.
3. Take advice – Working out which pension scheme to put in place requires specialist knowledge.  Talk to your accountant, in the first instance, and, if they recommend it, an IFA.
4. Communication is key – Employees may think this is a good thing but be prepared for those that don’t.  Set out a clear communication plan for explaining what will be happening, and the implications, as early as possible.  You have a month from your staging date (or for new employees from their start date) within which to tell them that they’ve been auto-enrolled (if applicable).
5. Don’t ignore what happens next – Employers are responsible for continually assessing who is eligible.  You’re also responsible for assessing the financial and administrative impact of compliance, on your organisations.  Finally, as you might expect, you have a long list of administrative obligations (detailed here).  Don’t get caught out.

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