Auto-Enrolment: Preparation and Planning

More than six million workers have begun saving money into a workplace pension as a result of auto-enrolment.

A report from the Pensions Regulator on this month’s compliance reports that more than 100,000 employers have auto-enrolled staff into a workplace pension. Now thousands of small businesses from all industries who employ people, must pay into workplace pensions for their staff.

The Pensions Regulator is reiterating its warning that employers need to plan ahead to ensure they understand what is expected from them and to avoid the risk of non-compliance and possibly a fine or two.

Too many small employers are leaving preparations too late, so it’s important not to get caught out.

Who do I enrol?

First of all, you will need to know who will be eligible in your business for auto-enrolment. These people will have the following attributes:

  • Are ages between 22 and the state pension age.
  • Work in the UK
  • Earn at least £10,000 a year. (this figure is reviewed by the government each tax year)

Time to plan

You will need to know your staging date for auto-enrolment. Your staging date is the date your automatic enrolment will take effect. If you don’t know your staging date you can find this using your PAYE reference.

Find out my staging date

Check who you need to enrol

Carry out a quick review of your staff using the above points of who is eligible, it could be likely that you may not need to automatically enrol anybody, but making a list of the people who are will help.

Creating an action plan

You should create your action plan at least 9 months before your staging date, if you leave your planning until the last minute it could incur extra costs and be very complex to prepare for.

Working out costs

For auto-enrolment you will need to pay a monthly minimum contribution into your staff pension scheme, to help you work out the amount the Pensions Regulator contributions calculator will be able to help you. You should also consider one off costs, such as the cost for setting up the scheme, getting payroll software and any independent advice from professionals.

Choosing a pensions scheme

You can choose to select a new pensions scheme or check your existing scheme for auto-enrolment. If your current scheme is not able to be used for auto-enrolment you will need to set up a new one which meets the appropriate requirements of automatic enrolment.

If you are choosing a new scheme, make sure it is well run and offers good value for money. You should also make sure that it will work with the payroll process or software you are using.

Assess and enrol your staff

From your staging date you will need to assess all of your staff and work out your duties to each of them. Once this has been done ensure that they are able to be automatically enrolled by sending your pension provider the information they will need to make your staff active members of the scheme.

Notify your staff

Six weeks prior to your staging date, you must write to all of your staff to let them know how auto-enrolment applies to them and explain their rights to them.

Ongoing duties and your declaration of compliance

On an ongoing basis you should keep track of all of your duties and ensure that you monitor the ages and earnings of your staff, this includes new starters and anyone who wasn’t eligible before but in the future they will be.

If any of your staff choose to opt out within one month of enrolling you will need to stop deductions of contributions from their wage and arrange a full refund within one month of their request. If you fail to complete these tasks on an ongoing basis, you could be fined.

Once all of your staff have been enrolled, you will need to complete the declaration of compliance to let us know that you have complied with all of your duties. If you have all the information ready, this may only take you 15 minutes.

If you haven’t had to enrol anyone at all, you will still have to complete this declaration to let us know.

If you have any problems or you need further advice with your auto enrolment planning and preparations please contact a member of the K A Farr & Co team who will be there to answer your questions.