YourBusinessWithJamesCaan2016 - 105

RETIREMENT

WORDS: TRISH LESSLIE | PHOTOGRAPHY: SHUTTERSTOCK

T

he law on workplace pensions has
changed. Under the Pensions Act
2008, every employer in the UK must
put certain staff into a pension scheme
and contribute towards it.
Known as automatic enrolment, it
applies even if you employ just one
person. Failure to comply could result
in hefty fines - an initial penalty of
£400 followed by daily charges of
between £50-£2,500, depending on the
size of your business. You could even
face prosecution for non-compliance, so
it pays to ensure you know exactly what
your legal duties are.
The auto-enrolment law initially only
applied to companies with 250 or more
staff, but is gradually being rolled out to
SMEs, with hundreds of thousands of
smaller businesses now approaching
their compliance deadlines.
If you're an employer, you should
receive a letter from the Pensions
Regulator advising you of your staging
date - or date for compliance - at least
a year in advance. However, if you're
uncertain of your date, you can look it
up using the staging date calculator at
thepensionsregulator.gov.uk, using
your PAYE reference.
You can also calculate your pension
scheme contributions on this site. They
currently start at 1%, but as an
employer you'll need to contribute a
minimum of 3% from October 2018 for
each eligible employee (see below).
If you already have a pension in
place, make sure it's suitable for
auto-enrolment. A business adviser can
help you with this if you are in doubt.
It's also a good idea to invest in payroll
software that's compatible with
auto-enrolment so you can pay your
contributions directly from it.

THE ESSENTIALS

WHO YOU NEED TO ENROL

You must enrol all staff aged between
22 and the state pension age if they earn
more than £10,000 a year by your
staging date. If you don't have any such
employees, you don't have to set up a
scheme, but you do have to let the
Pensions Regulator know.
For members of staff who earn less
than £486 a month, you will need to
provide a pension scheme but not

JAMES SAYS
It is a legal requirement
to enrol your workforce
into a pension scheme
now, but it is a highly
complex market so do
your research and shop
around to find the best
provider that is
appropriate and relevant
contribute. For staff earning over £486
a month, you will have to contribute.

WHAT STAFF NEED TO KNOW

Once all members of staff have been
automatically enrolled, you'll need to
write to each and every one of them
informing them of your pension scheme
and their right to opt out. You can find
templates on National Employment
Savings Trust (nestpensions.org.uk), a
workplace pension scheme for autoenrolment created by the government.

Employees have only a month to opt
out after enrolment and be fully
refunded any contributions. After this,
whether or not they are entitled to a
refund depends on the rules of the
pension provider.
The pension scheme gives the opt-out
notice to the member of staff to avoid
any undue influence by the employer
and it's illegal to try to encourage
your employees to opt out of your
pension scheme.
If a member of staff does decide to
opt out, you must alert payroll to stop
taking any more contributions from
that employee's salary. Staff who opt
out can always opt back in later.

THE NEXT STEPS

You must complete and submit a
declaration of compliance within five
months of your staging date. If you fail to
do this in time, then you face a fine.
It is also a legal requirement to put
certain staff back into a pension scheme
every three years. You must assess staff
who have opted out or those who have
stayed in your pension scheme but
have chosen to reduce the level of
pension contributions to below the
minimum level.
Even if you have no staff to re-enrol,
you will need to complete a new
declaration of compliance to tell the
regulator how you have met your duties.
Your re-enrolment date is chosen by
you but must fall within three months
either side of the third anniversary of
your staging date.
The date you choose for re-enrolment
will apply to all your staff; you can't use
different dates for different staff
members or departments.

BENEFITS FOR EMPLOYEES
n The government tops up pension savings with 20% tax relief, so for every 80p
your employee puts into their pension, the state tops it up with 20p of tax relief,
boosting it to a total of £1
n Any employee who pays tax at more than the basic rate can claim more tax relief
through their annual self-assessment tax return
n They will receive their workplace pension on top of the state pension
n They may be able to take all their pension pot in one lump sum
n They could be entitled to take 25% of their pension pot tax-free

105
http://thepensionsregulator.gov.uk http://nestpensions.org.uk
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