Workplace pensions law has changed. Every employer in the UK will be required to help their workers save for retirement.
If you are a UK employer you will be required to automatically enrol eligible employees into a workplace pension scheme. The Pension Regulator has already given your business a compulsory staging date confirming the latest date by which you need to have your new Pension Automatic Enrolment duties in place.
So where is the first place you should start on the journey to put in place everything that is required from the regulations?
You might conclude that starting with a Pension Scheme would be the natural starting point, and whilst ensuring that the pension scheme you use for your business is an important decision, when you look at the processes involved in satisfying the Pension Automatic Enrolment requirements you’ll soon realise that the administrative and compliance duties will be of more pressing concern.
We have put together a list of Employer Duties that we hope will go some way to helping you plan how to tackle Automatic Enrolment – think of it as a ‘to do’ list, all be it a very long one!!
Every eligible employee in the UK will need to be automatically enrolled into a meaningful workplace pension scheme by 2018. The new duties are being introduced gradually and it is essential to know when these new employer duties will affect your organisation. The Pension Regulator (TPR) will write to all employers to confirm the date the duties will start. This is known as your ‘Staging Date’.
Broadly speaking each employer’s Staging Date is dictated by the number of employees they had in April 2012. We have created a handy calculator which will help employers understand when your staging date is likely to be.
Each employer will eventually need to assess their workforce and segment them into three different categories:
Non Eligible jobholders
Once an employer has done this they will need to write to and automatically enrol all of their Eligible Jobholders into their registered Qualifying Workplace Pension Scheme. The employer must then write to all of their Non Eligible Jobholders telling them that they can be enrolled if they wish, and lastly write to their the Entitled Workers to tell them they have access to the scheme but will not necessarily get an employer contribution.
The assessment process will need to be adopted for every pay reference period and you will need to do this again for those who have changed status or for new hires, and then again and again and again.
Employers will also need to keep records of this activity for a period of at least 6 years so that if the regulator should come knocking they can demonstrate their compliance with the legislation. Of course, Eligible employees can opt-out of the pension scheme and if they do so within 30 days of being enrolled then a refund of any personal contribution required will need to be delivered by the employer as soon as possible. Should an employee opt-out of the scheme then their employer has to make a record of this and then 3 years after the Staging Date automatically enrol them again.
Employers will need to use the data held by their payroll provider, HR team or combination of the two to regularly assess their workforce’s position including regular reporting to the regulator on the position with regard to their pension scheme and compliance with their obligations.
At this point you may be beginning to get an idea that managing employee data and understanding your options is going to be very important. Data management could prove to be an expensive exercise as the task of transferring the data concerned whilst maintaining its security and integrity will not be a simple task. Even large employers with resources and budgets to match have reported that this is an enormous challenge.
Once your employee data is organised you can set about the important task of identifying who the relevant employees are and start to build a picture of the cost of pension contributions. But even here there are several layers to understand before you can properly calculate the Pension Contribution.
Employers are going to have to get to grips with terms such as ‘Qualifying Earnings‘ and ‘Certification‘ as there are different ways to calculate the pension contributions that employers and employees will be required to make. Understanding this will be essential because there could be a big difference in the Pension Contribution costs to your business.
Add to this the fact that employees are likely to have a few questions of their own, medium to small sized businesses will have their hands full in no time at all.
Many smaller employers do not have HR teams and Pension specialists to help them address the issues presented by Automatic Enrolment.
LPAES can help you plan and manage your obligations, providing all the expertise, guidance and technology to make sure you comply with the new regulations.
Please contact us to see how we can help you.