At a recent seminar it was reported that those businesses which have completed Auto enrolment have taken on average 18 months from the start of the thinking process to their staging date. And these are the large organisations that are able to pull together a task force to manage the project. How long will a smaller company take, who does not have a team available to share the work load.
One organisation, I spoke to recently said that it would not be a problem as the staff would opt out anyway. This is not an option as there has to be a qualifying pension for them to opt out of. Research shows that currently only 10% of employees opt out, clearly all employers need to have a plan ready to implement their legal responsibilities.
The staging date for your organisation depends on the number of employees, and the Pension Regulator will advise you 12 months before your staging date, which could already be 6 months too late to achieve your deadline. If you have fewer than 49 employees your date will be between June 2015 and April 2017, if you have between 50 and 249 employees you need to comply between April 2014 and April 2015. You are able to delay your state date by 3 months, but you must inform your staff. You can check your date at www.pensionregulator.gov.uk using their interactive tool.
Not all employees will be eligible to join, some workers will be eligible, some will be non-eligible and some will be entitled workers. You will need to know, and be able to identify workers who move between each classification.
You will also need to plan how you will cover the additional cost. Employers must contribute at least 1% up until September 2017, then 2% and from October 2018 3% with a total minimum contribution of 8%. Is this cost built into your plans and budgets?
Some employees may see the contribution as part of their package, and it could become difficult to recruit quality staff if they are already in a pension with a current larger employer, so you may want to bring forward your staging date.
What is the impact on Pension Sector?
It is worth considering the impact this will have on the pension industry. In April 2014 it is expected that 14,000 employers are due to hit their staging date, if your staging date is April 2016 you are one of nearly 40,000 employers reaching the staging date. Will the pension industry be able to cope with sort of spike in demand. It could be worth bringing forward your staging date so that your pension provider will be able to focus on you, providing the service and support you expect. It is also projected that the number of workers joining leaving or moving a pension each month will be 500,000. Some pension providers have already refused to provide qualifying pensions for some clients, pushing more employers into NEST.
So what do I need to do?
– Nominate a point of contact and register with the Pension Regulator
– Know your staging date
– Assess your workforce and types of workers
– Review pension arrangements
– Review payroll system able to flag trigger points and calculate contributions
– Communicate changes to all workers
– Automatically enrol eligible workers
– Contribute to pensions
This blog has been written by Peter Stamps, one of Tectona’s Client Finance Directors. Peter’s profile can be found here >
If you would like to learn more about Auto enrolment or discuss any of our blog topics, please contact us through the Tectona website or call Mark Nicholls on 07818 407061 or Ronnie Epstein on 07543 275902.