Preparing for workplace pension reform and automatic enrolment:

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The Government introduced new pension legislation through the Pensions Act 2008. This legislation is likely to affect all businesses who have people working for them, irrespective of the size of the business or the number of employees

The legislation is aimed at encouraging greater private savings in response to longer life expectancies and to mitigate expansive problems of financial stability in the post retirement period.

Businesses are likely to need to seek advice to manage the new complex workplace pension requirements as the new mandatory pension registration requires all employers to start automatically enrolling staff into pension schemes from a certain date and fines are imposed on those who do not comply.

The question then is, when will it affect your business?

As part of the Pensions Act 2008, enrolment deadlines have been issued on the basis of number of employees. By the relevant deadline (or “staging date” to give it its proper name) employers will have to have amended current pension arrangements or have created a new company pension scheme to ensure it complies and then register it with The Pensions Regulator.

Autoenrolment actually commenced in October 2012, with the larger companies joining from that time and smaller companies are joining month by month.

Deadlines:

Although the staging date for businesses with more than 3,000 employees has passed (1 July 2013), businesses which fall into lower employee thresholds will have to brace themselves for implementing this mandatory change and consider the cost and impact to their business over the coming months.

Staging dates for the remaining business:

• Businesses with 250 or more employees will have a staging date up to February 2014 and should have their pension plans in place now.
• Businesses 50 – 249 employees will be staging between April 2014 and April 2015 – they should have started planning and with a staging date in a couple of months should have the scheme in place ready to go now.
• Businesses with 30-49 employees will be staging between August and October 2015 and need to start preparations this year.
• Businesses with fewer employees than 30 will have staging dates from 1 January 2016 to 1 April 2017 (recent change as of 2014). NB This category is dependent on the PAYE reference more than the other categories so an additional check needs to be done.

What to consider:

There are 7 key steps issued by The Pensions Regulator (TPR):

• Know your staging date by using your PAYE reference on the TPR website (or asking us)
• Assess your workforce to see who meets the criteria for automatic enrolment
• Review your pension arrangements and see whether they can be used for automatic enrolment
• Communicate the changes to your workforce about their pension scheme inclusion and confirm details of contributions and pay deductions that will occur
• Automatically enrol your “eligible jobholders” and provide pension schemes with details of workers to be automatically enrolled
• Contribute to your workers’ pension on behalf of your workers and monitor the eligibility of workers on an ongoing basis
• Register with The Pensions Regulator and keep statutory records

Employers will need to ensure, by their staging date, that they offer a pension scheme that complies with a number of conditions, including all the communications and systems requirements prior to the staging date. It is estimated that preparing for autoenrolment takes between 12 – 18 months.

Categories of job holders:

There are four categories of employees of which employers need to be aware:

• Non-eligible jobholders: Workers not eligible for automatic enrolment, but can have the option to opt in, are those who are aged between 16 and 75 who earn between £5,668pa* and £9,440pa* (or earn above £9,440pa* and are aged under 22/ over state pension age.)
• Eligible jobholder: Workers eligible for automatic enrolment who are aged between 22 and the state pension age, and who earn over £9,440pa*
• Entitled worker: Workers who earn less than £5,668pa* and are aged between 16 and 75 have the right to join a scheme and the employer must make arrangements if the worker decides to join. The employer is not required to make any contributions on behalf of the worker however.
• Owner-managed companies: Many companies operate under directors of owner managed companies, to which there are no employees and thus may not want to comply with workforce pensions. However, some owner managed companies may be caught by the legislation depending on the management structure and will need to comply.
  * = earnings levels as at 2013/14

 Article supplied by InterGest UK