Auto Enrolment Pensions
This blog from JGBC is to help you understand the implications of auto-enrolment on your business and employees and your responsibilities
As a bookkeeper, I want to help my payroll clients through the new automatic enrolment (AE) process. If you employ at least one member of staff then you will soon have AE duties to carry out. If you have eligible workers you must act to enrol them into a qualifying AE pension scheme at the staging date that will be sent to you via post.
If an employer has non-eligible or entitled workers, then the employer doesn’t have to set up a pension scheme. Both non-eligible workers and entitled workers may decide they want to opt in or join the pension scheme. If these employees chose to do so then the employer must act to fulfil their rights. Therefore, it’s a good idea for you to choose a workplace pension scheme to be ready for this scenario.
Setting up a pension scheme
If you already have a workplace pension scheme, you must check to see if it meets the requirements of automatic enrolment. You would also need to confirm whether the scheme accepts all employees. You will need to contribute at least 1% of the employee’s qualifying earnings into the pension pot. This contribution rate will gradually increase over the next few years to 3% and eventually 5%.
Types of schemes
There are a large number of schemes for companies to choose from, including defined contribution (DC), defined benefit (DB) and hybrid schemes. This range of options can make the decision-making process even more confusing for you. NEST is one scheme that has been specifically set up to cope with a large number of employers due to go through the process of automatic enrolment. It has been set up by the government and is free for employers.
The Pensions Regulator (TPR) believed that most employers will choose a DC scheme as these pension schemes typically are run by large and expert pension providers. These schemes cost less overall and are free to employers, requiring less input from the employer. TPR states that small employers will not benefit from setting up a trust-based pension scheme as they tend to be expensive and time-consuming to run the scheme effectively.
Helping you choose a scheme
My payroll clients often ask for guidance when it comes to selecting an automatic enrolment pension scheme for their employees. I will highlight certain important factors to you and check that it meets the requirements to qualify for AE. You should look at factors such as cost to the business, whether it is compatible with your existing payroll software and what tax relief the scheme uses.
Some schemes may only accept employers with a minimum number of staff or staff who earn a certain amount. I will help you to check and confirm that the scheme can be used for all staff. I will also help check what the pension provider charges clients and how much the staff will have to pay. Certain providers are charging in different ways. Some are charging per month, others have a setup charge and several are free.
Payroll and pension compatibility
It will be easier for you if your chosen pension scheme is compatible and supported by my payroll software (which most pension providers are). JGBC’s payroll services will handle all of the automatic enrolment tasks for you, including employee assessment, batch enrolment, production of AE communications, postponement, opt in, opt out and requests to join the scheme and ultimately reporting. JGBC payroll services will work with your pension scheme to produce the necessary contribution and enrolment files.
To find out more about JGBC’s payroll and pension services. Contact me via the Contact page to have a chat about the automatic enrolment process and how I can help your business with the new AE process.