The new pensions legislation can be daunting and complex so we recommend that you prepare well in advance and find out what you need to do to get the ball rolling if you haven’t done so already.
What is pensions auto-enrolment?
It’s a way of making sure all eligible employees automatically become members of a qualifying pension scheme with a high enough level of contributions.
What does it mean for your company?
If you’re a UK employer you have a major role to play. You’ll have to make sure your company’s approach to pensions meets the new legislation and complies with the new obligations by:
- Using an existing pension scheme
- Setting up a new scheme, or
- Using the government low cost scheme – the National Employment Savings Trust (NEST).
It is important that the pension scheme chosen meets certain standards appropriate for all employees and meets the qualifying criteria and auto enrolment criteria.
Know your staging date and plan ahead
The number of people you have on the payroll as of 1 April 2012 determines when auto enrolment kicks in – this is called your staging date. By the time you reach your staging date, you’ll need to have a number of procedures and systems in place so you’re ready to enrol workers. You can’t postpone your staging date. However, you can usually bring it forward, for instance to coincide with a convenient accounting period or your pension scheme renewal date. Your new staging date must be the first day of a month.
Assessing the types of workers in the business
Another key step for an employer when looking at its auto-enrolment obligations is to identify all its ‘workers’. Employers will have auto-enrolment duties only in respect of certain categories of worker. A worker is an individual who has entered into or works under:
- a contract of employment; or
- another contract by which he undertakes to work or perform services personally. This is sometimes known as a ‘contract of service’.
An individual carrying on a profession or business undertaking, who is contracted to provide services for a client or customer, will not be a worker – self-employed contractors are normally excluded under the auto-enrolment legislation.
To start getting ready for auto-enrolment you need to consider the following:
- Whether an existing pension scheme will be deemed to be suitable – does it fit within the qualifying criteria? If not, can it be adapted or do you need a new vehicle?
- The financial implications and the added costs? How will you budget, when should you budget?
- Where risk benefits (death in service benefit, income protection, etc) are limited to pension scheme members, will they now be provided to employees who are auto-enrolled?
- How will additional administrative duties be dealt with including:
- Payroll and HR systems
- Existing scheme administration systems
- Increased communications
- Data transfer requirements
- Notification of opt-out
How we can help
Whatever your organisation’s size, there’s a lot of planning to do. If you would like more information about preparing for your staging date and would like to discuss how to get started please contact our team by calling us on 020 8652 2700.
Harmer Slater Limited
19 Cedar Road
Surrey SM2 5DA
Tel: 020 8652 2700
Fax: 020 8652 2719
Registered in England and Wales No 07167165
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