How to prepare your start-up for the new pension rules

by Startacus Admin

British workers need help organising their pensions. With a survey revealing that 20% of workers have no pension savings at all (Printerland), it’s clear that many employees need extra encouragement to help them plan for retirement. But, thanks to new government measures, employers are stepping up to help tackle the issue. Following changes to the Work and Pensions Act, all employers are now legally obliged to offer their staff a place on a pension scheme (e.g. a company pension) before February 2018.

While most well-established companies have already enrolled their staff, many younger businesses and start-ups are still catching up. The Pensions Regulator will impose fines and penalties on employers who do not fulfil their legal duty to offer the scheme, so don’t be caught out. Here, we’ve shared every step you need to take to ensure you’re ready for auto-enrolment.

1.    Find your staging date

Your staging date is the final deadline for auto-enrolment. The exact date will vary depending on how many people you employ, and when you registered your business. This handy calculator from the Pensions Regulator will tell you exactly when you need to enrol. It’s vital that you get your pension scheme ready for this date, as you could face fines and civil penalties if you do not comply.

2.    Find out who qualifies for auto-enrolment

The pension scheme will not necessarily apply to all employees. Under the current rules, employers only need to enrol employees who are aged between 22 and the national retirement age, and work in the UK. You will also need to take into account how much they earn: if it’s over £10,000, then they will qualify for auto-enrolment.

There’s also an earnings trigger and a qualifying earnings band, both of which decide how much a person must earn before qualifying for auto-enrolment. These are reviewed and published every year by the government. Once an employee meets these criteria, they become an eligible jobholder — and, by law, you must offer them a place on a pension scheme.

3.    Choose a pension scheme

If you don’t currently have a workplace pension scheme, you’ll need to do some research and find one that suits both your employees and your business model. Declan Harrington, a Financial Advisor at the multi-disciplinary practice Savage Silk, warns that you should consider this carefully. “Auto-enrolment will mean a significant increase in responsibility for employers, who will have to make careful decisions to safeguard their employees’ financial futures,” he says.

“As the final deadlines draw near, it’s easy to rush into a decision about which company pension to use. But you should consider this carefully, as the type of pension scheme you pick can have a big impact on both company finances, and your employees’ future pension pots. If you’re having difficulty, look for a scheme with low fees, a great track record for returns, and a robust investment strategy.”

4.    Inform your employees about their pension scheme in writing

It’s your legal duty to formally write to your staff and let them know they qualify for auto-enrolment. This should detail the specifics of the scheme, including when it will start, and what the contributions to the pension will be. You can download template letters from the Pension Regulator to help you save time, and ensure you’re getting it right.

5.    … And be ready in case they decline it

While it’s your duty to offer all eligible jobholders a place on a qualifying scheme, they will still be free to opt out of the plan. You should be prepared for this possibility, as The Pensions Regulator has a protocol in place that you need to follow when dealing with this.  

Any employee who decides to opt out of the scheme must formally decline it in writing. As an employer, you have a duty to refund any contributions made under the scheme to the employee within a month of receiving their notice. They will be re-enrolled in the scheme every three years, and so will have to re-submit their notice each time they wish to opt out.

6.    Follow the law and allow employees their rights

Once the scheme is in place, there are a few things you should bear in mind. It’s illegal to discriminate against employees who qualify for the scheme in favour of those who don’t, and you shouldn’t imply that someone may be more likely to get a job if they opt out. You can’t impose age limits or probationary periods before offering the scheme, nor can you try to incentivise or intimidate employees out of accepting their place.

In short: trying to find ways to curtail the pension scheme is illegal, and can result in sanctions by The Pensions Regulator, so avoid any trouble by fulfilling your obligations.

7.    Register your compliance and manage the scheme

When you’re ready for auto-enrolment, it’s time to declare your compliance. When you have all the relevant documents sorted, this can be done simply and quickly using the government portal.

However, the process doesn’t end once you declare your compliance. It’s important to review your scheme regularly and make sure you’re on top of any changes made to the legislation. Remember that you will need to check the annual review of the earnings trigger and the qualifying earnings band, as this will change from year to year.

Managing your workplace pension scheme can seem like a chore, especially for new companies.  Just follow our step-by-step guide, and your business will be ready for auto-enrolment in no time.

 

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Published on: 22nd November 2017