This month, we are having a little break from our “Ask the accountant” series as we thought it would be timely to offer a refresher on workplace pensions. This is particularly timely as many smaller businesses are now reaching their “staging dates” and finding themselves having to comply within the coming months.
What is Automatic enrolment?
This is the new legislation requiring UK employers to set up a pension scheme for employees and pay contributions on behalf of most of them.
Although pensions are usually the preserve of financial advisers, this also falls within the remit of us accountants. In addition to the associated tax advantages, the whole AE process is administrated via the employer’s payroll.
What do we have to do to comply?
For business owners with staff, then depending upon the size of your workforce, you have to implement their pension scheme between now and 2018 on set dates; this is known as your “staging date”. The Pensions Regulator should have already written to you confirming this.
You should have already started planning, and the kind of action you need to take includes:
• nominating a primary contact.
• looking at pension providers and selecting a qualifying pension scheme
• Talking to your accountant to find out if they are able to upgrade your payroll to handle the administrative side of this.
How much do I have to put in to a AE pension scheme?
Apart from your time, professional fees, and in some cases, scheme fees, the main costs are the contributions into the pension scheme. The proposed minimum contributions from the employer are 1% of qualifying salary until April 2018, 2% in 2018/19 and 3% thereafter. For the member of staff, they will have to contribute 1%, 3% and 5% for the same periods.
Are there any exemptions?
AE is not likely to affect you if you don’t employ staff. However, some businesses employ the directors themselves and issue regular payslips. Generally speaking, they won’t have AE duties.
Of course, there are caveats to all of this, and confirmation regarding all the issues raised here should be sought from a professional.