Workplace Pension Providers: Dealing with Auto-Enrolment

As of 2017, businesses across the UK will be required to offer their employees a workplace pension. If you own a small business, choosing workplace pension providers can be a difficult choice and you may not even know where to start. Auto-enrolment is the term used to describe the law that requires all existing businesses across the country to enroll employees in a pension plan.

Workplace Pension Providers for the Small Business Owner

Workplace Pension ProvidersInitially, only large companies were affected by the government’s auto-enrolment project, which launched in 2012. Smaller companies began to be effected in 2013, but April of 2017 is the deadline that requires every business, large and small to select workplace pension providers and ensure that every employee is enrolled. Companies that were set up after 2012 will have a little longer than the 2017 deadline.  Currently, only companies that have been set up after October of 2016 and on will have until February of 2018 for auto-enrolment.

The law now requires any company that was created before 2012 to enroll all employees over the age of twenty-two who earns a minimum of £10,000 annually into a pension scheme and contribute to it. While providing a pension to all eligible employees is now mandatory, each employee will have the option of opting out.

While the idea of choosing a workplace pension provider can seem daunting to most small business owners, it can work as an incentive for the employee, one that doesn’t include a pay increase or additional benefits.  This can be a big bonus for smaller companies that cannot afford to increase salaries.

So when can the average small business owner anticipate their staging date? The staging date is the day that the auto-enrolment process goes into effect. Your staging date will depend on the size of your staff and payroll.

Keep in mind that business owners need to fill in their declaration of compliance within five months of their assigned staging date. Failing to do so on time can result in fines. This process will need to be repeated every three years including re-declaration of compliance and auto-enrolment.

Pension experts recommend preparing for auto-enrolment at least six months in advance in order to enjoy a smoother transition and set policies in place. The law requires employers to notify all employees regarding auto-enrolment and the specific pension scheme that was chosen. The business owner will also need to give employees a significant amount of time to opt out of the pension scheme should they so choose.

A financial adviser can assist you during this time and not only ensure that your company is in compliance but also that the scheme you choose meets the regulatory guidelines.

Choosing a Scheme that Works for your Employees

Choosing a Scheme that Works for your EmployeesChoosing a scheme for a personal pension is a difficult decision, but one that’s done based on a little research and what your goals are for the future and your retirement. Choosing a scheme for your entire company can be alarming and definitely requires the guidance of a financial advisor. As you’re searching for the right type of scheme for your company, you’ll need to consider the scheme’s annual fees, flexibility, and overall limitations. Some schemes can be severely limited when it comes to investment options or the annual fees can be astronomical, making it difficult for your employees to keep up with contributions.

When choosing a pension plan, employers will need to consider a number of factors. A major factor will be the range of investment funds that are offered. The majority of schemes will offer a wide range of investment options including equity-based funds for employees investing for more than thirty years and safer investment options for employees who are close to retirement. You should also choose a pension provider that offers ongoing and additional support in the form of technical help or record keeping and payroll services. A pension provider that also offers assistance with employee communication can save you a lot of time, especially if some of your employees failed to opt out of the scheme and suddenly notice a portion of their wages have been deducted from their salary. A pension provider will be able to clearly explain these changes or provide the appropriate opt-out forms when necessary.

You will also need to create a budget for your staging date if you’re a smaller company unless you already have a pension slush fund in place. Initially, the contributions levels are set fairly low, requiring employers to only contribute a minimum of just three percent of basic pay for each employee who is enrolled in the pension plan. While three percent per employee can certainly add up, don’t panic about your finances just yet. According to financial experts, the employer’s national insurance bill will decrease significantly thanks to their pension contributions. Contributions made by employees will come out of their gross earnings. In turn, this automatically lowers the amount that gets taken home every month, resulting in lower national insurance costs.

Reviewing Staff Benefits and Creating a Scheme Review Committee

Staff BenefitsAuto-enrolment can be considered a great opportunity for employers because it allows them to review the type of benefits they currently offer their employees. By offering a higher pension contribution to your employees you may attract more qualified employees and minimize current employee turnover.

While larger companies may already offer a good quality pension scheme, most small organisations will be implementing pension plans for the first time. Establishing a pension management committee can bring certain benefits to your place of business such as better value for money, fewer employee complaints, improve awareness of employer contributions, and improved member understanding. However, while there are no legal requirements for employers to establish such a committee, it can be a great solution for the employer who doesn’t wish to become closely involved in the running of the company’s pension scheme. The individuals in this committee will need to keep accurate records and review any staff who have just joined the company.