Pensions auto-enrolment avalanche
Auto-enrolment for pensions has had a successful start with just a 10% opt out rate since the first staging date in October. To help businesses comply, it is recommended that employers use a 12 to 18 month implementation plan to ensure they are ready. Mike Jenkins, Business Development Manager at Welplan Pensions, explains why.
Research from The Pensions Regulator has revealed that just one third of smaller firms have started planning for auto-enrolment, with two fifths stating they would leave it as late as possible before considering how to apply.
These startling figures indicate that employers are still underestimating the extent of preparation required in order to comply with the pension reforms. The Government may be claiming auto-enrolment success, but we are far from out of the woods yet.
Companies should be allowing up to 18 months to prepare for automatic enrolment to ensure they avoid the statutory penalties that they could incur, according to the Recruitment and Employment Confederation (REC). At the very least, a 12 month implementation plan should be put in place, which means that even the smaller companies should be looking to implement such plans sooner rather than later.
Another worry is that according to Aviva’s Working Lives report, only 59% of workers are aware of the pension reforms and auto-enrolment, compared with 87% of employers. It is vital that employers are robust in their communication and make their staff fully aware of the reforms and what auto-enrolment will mean for them financially now and in retirement.
Here to stay
The Government’s Pensions Act 2008 states that over the next five years every employer must automatically enrol every eligible jobholder into a qualifying workplace pension scheme and make contributions. Eligible jobholders include UK workers aged between 22 years and state pension age who earn more than £9,440 a year (2013/14). This automatic enrolment earnings trigger is in line with the PAYE tax threshold, and the lower and upper limits for qualifying earnings are aligned with the limits used for National Insurance currently set at £5,668 and £41,450 (2013/14).
Auto-enrolment is not going to go away. Since the first staging date for auto-enrolment on October 1, only 10% of employees have opted out of auto-enrolment, according to Nest. This is half as many as had been expected and has been heralded as a success for the pension reforms.
The first step is to know your staging date and keep up to date with changes. In the next 12 months every employer with more than 90 employees will reach their staging date (1 May 2014 for businesses with between 90 and 159 employees). All these businesses should have started planning for it already. Businesses with less than 89 employees have staging dates ranging from July 2014 to April 2017, with new employers having staging dates reserved for between May 2017 and February 2018.
The Government’s National Employment Savings Trust (NEST) is designed to assist those companies looking for a qualifying scheme. However, other schemes either run in-house or by another provider, may better suit the needs of businesses. Some businesses may be best served by using a qualifying scheme by another provider that would not only manage the scheme but also keep the company abreast of changes. At this stage, every business would benefit from signing up to such a scheme sooner rather than later.
There are important points to remember. For example, the importance of choosing a provider that can integrate an auto-enrolment system into the employer’s payroll system and ensure the providers system has assessment tools to assess employees to decide who should be enrolled.
Welplan Pensions is a qualifying pension scheme that was established in 1988 to meet the particular requirements of the building services industry. It has been the preferred pension supplier for the H&V National Operative Agreement since 2010 and recently appointed preferred provider for both the Engineering Construction and Thermal Insulation industries. The scheme meets all of the requirements of the new pension legislation.
Welplan Pensions offers a pension solution for your entire workforce and takes care of automatic enrolment and re-enrolment with a tried and tested administration system, providing advice and support through a dedicated helpline. In short, it could be the answer to your workplace pension needs.
Time is running out and non-compliance is not an option. Choosing the right qualifying pension scheme provider is in your hands.