Wake up to auto-enrolment
Automatic enrolment of employees into pension schemes has passed the two year mark. The time to ignore it has now passed…
About 4.7 million people have been automatically enrolled into a workplace pension since the system started in October 2012, according to The Pensions Regulator (TPR). However, by the end of September, fewer than 34,000 employers had completed their automatic enrolment declaration of compliance. The Government started with the largest employers – who generally have the appropriate administrative resources - yet there have been glitches: TPR enforcement action meant one company in the FTSE 250 had to pay over £140,000 in back contributions after missing their staging date for the introduction of automatic enrolment.
It is now the turn of employers with 60 or fewer employees. Back in July TPR said that “… there are considerable challenges over the next 12 months and beyond, particularly as we start to see employers for whom making pension provision for their employees will be a new and previously untested process.”
One lesson from the first phase of automatic enrolment is that planning is vital: the staging date is set in stone. TPR recommends that your business’s automatic enrolment timetable should begin a year before your staging date.
The payroll system is a key factor. It is essential to collect the correct employer and employee contributions and pay them when due. Supplying accurate employee data to your pension provider is also vital, as is meticulous record keeping. A payroll failure in any of these areas means a possible TPR intervention with financial penalties of £50,000 or more. Don’t assume that your existing payroll system will necessarily handle automatic enrolment. One of the problems faced by the FTSE 250 company mentioned above was that their payroll system suffered from “design flaws resulting in significant delay in achieving compliance”. To avoid such problems and make auto-enrolment a smooth process for you and your employees, ask us about your payroll system options now.
In this edition
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This newsletter is for general information only and is not intended to be advice to any specific person. You are recommended to seek competent professional advice before taking or refraining from taking any action on the basis of the contents of this publication. The newsletter represents our understanding of law and HM Revenue & Customs practice as at 10 October 2014