Preparing your business for the UK pension change

Many small business owners in the UK will now be thinking about the auto-enrolment pension scheme that has been introduced across the country and the impact it is going to have. With the new scheme, employers are now obliged to put in place a workplace pension scheme and automatically enrol their current workers on to it, whilst also making some form of contribution themselves.

Understandably, some small business owners new to running a business or just unsure about how best to approach this change may be left questioning what the next steps are. Most importantly, business owners will be looking at their finances to understand and plan how best to prepare their business for a workplace pension scheme.

Here’s our top five points to think about when preparing your business for a new pension scheme:

  1. The size of your business matters

 The day in which you have to enrol your employees onto a workplace pension scheme is also known as your ‘staging date’ and is wholly dependent on the size of your business. Many larger businesses will have already had their staging date back in 2012, but the process has been slightly more delayed for small businesses to ensure that you have enough time to prepare.

Your staging date can be confirmed by using your PAYE reference number[1] on The Pensions Regulator website. If you don’t use the PAYE scheme, your staging date will automatically take place on 1 April 2017. Give yourself plenty of time before your staging date so you can plan your finances and find the best pension scheme for your staff.

  1. Understanding who qualifies

There’s three groups of employees that should be considered when determining who is qualified to join your workplace scheme: eligible, non-eligible and entitled. All workers aged between 22 and the State Pension age that earn at least £10,000 a year will be eligible. Those workers between the age of 16 and 22, or between the State Pension age and 74, earning over £10,000 a year will not be eligible. Entitled workers are those who are aged at least 16 but under 75, and earn less than £5,824. This final group can request to join the scheme, but you don’t need to pay a contribution.

  1. Let’s take a look at the figures

 The government has set a minimum contribution standard that employers must adhere to, which states that most will start paying 1% of worker’s “qualifying earnings”; this is set to increase to 3% over the next few years.  The key thing to note at this stage is that “qualifying earnings” does not mean all of an employee’s salary, but applies to earnings over a minimum amount (currently £5,824) up to a maximum, which is currently £42,385. These current figures are expected to be reviewed annually by the government.

  1. Is it compulsory for all employees?

 Your employees do have the right to opt out, although, so far, most workers have opted in[2]. This can be viewed as a sensitive area as it’s illegal to force workers to opt out or offer to supplement the payment elsewhere, for example a pay rise. Cameron Chase can offer advice on the best solutions to work with to best handle these changes professionally.

  1. Which pension scheme to choose?

 With a number of costs associated with this change, for example contributory rates, communications, HR and accounts, it’s important that you’re getting the right advice and expertise suited to your business needs. Our specialist team at Cameron Chase can help throughout the different stages of this change process.

 Our services include:

  • Providing a simple and clear explanation of what you, as an employer, need to do to ensure you comply with the rules of adopting a workplace pension scheme
  • Reviewing the impact of the scheme on your business and the costs involved – this will differ depending on your business
  • Minimising the operational costs for your business and reducing the administrative burden by supporting a number of functions in the business, such as human resources, payroll and finance
  • Providing guidance in a range of areas, including communications with employees, new systems and finding a home for pension contributions
  • Helping you to comply with the regulation on an ongoing basis, which includes providing support if you go through a restructure or significant increase or decrease in workforce

Planning well in advance of your staging date will be key to ensuring that you’re completely prepared and give you the reassurance that you have a compliant scheme in place, avoiding hefty penalties.

[1] The Pension Regulator – http://www.thepensionsregulator.gov.uk/employers/staging-date.aspx

[2] The Guardian – http://www.theguardian.com/small-business-network/2015/sep/17/pension-auto-enrolment-business-owners-scheme

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