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Our latest Blogs about Auto-Enrolment


Auto-Enrolment Myths
I set up the Auto-Enrolment Bureau in 2013, having worked for a large firm of actuaries and pension consultants in Cheltenham for nearly 20 years.  Setting up my own workplace pension business seemed like a very natural transition for me because of my background and qualifications – I believe if you run your own business you need to be the ‘go-to’ expert for your industry.  

The aim of my business is to provide much needed support to other small business owners who are struggling with the complexities and red tape around workplace pensions.   We’ve helped hundreds of Gloucestershire businesses in the last three and a half years – estate agents such as Steve Gooch, country estates such as the Bathurst Estate in Cirencester, butchers, charities, farms and children’s nurseries – businesses from all walks of life are affected.   

Workplace pensions are a legal requirement for businesses large and small, even if you have just one eligible employee, there’s no getting around it!  We’ve come across quite a few myths and misconceptions that may cause businesses to fall foul of the law, so in the interests of businesses around Gloucestershire I would like set the record straight on a few of these…

‘I’ve had a company pension scheme for years – that’ll do won’t it…?’   

 

Not necessarily.  Workplace pensions have a limit on how much they can charge employees (the ‘Annual Management Charge’) of 0.75%, and many old policies charge more than this, which means they can’t be used for workplace pensions.  And the provider may not allow the policy to be used as a workplace pension.  If it doesn’t meet the workplace pensions ‘qualifying criteria’ then the old scheme, however generous, must be closed down and a new compliant workplace pension scheme must be set up before your deadline.    

‘I’ve checked, and none of my staff are interested in joining a workplace pension, so I’m not setting one up...’   

 

This could get you into big trouble with The Pensions Regulator!  If you have eligible employees aged between 22 and state pension age who earn over £10,000 a year, then you must enrol them into a workplace pension, whether they like it or not.  And staff who fall outside of these age and earnings criteria have a right to opt into a pension scheme if they want to, unless their earnings are very low.  Once enrolled, employees need to read the pension provider’s welcome pack and it’s only then that an employee can make an informed decision as to whether to opt out of the scheme.  

‘I don’t need to do anything about this until 3 months after my deadline, or Staging Date, because I can postpone enrolment for 3 months, so I’ll worry about it then.’  

 

We’ve helped many employers who have fallen foul of this one.  If you’re planning to implement postponement for 3 months from your Staging Date it’s a legal requirement that you notify your staff of this by way of a written postponement notice, within 6 weeks of your Staging Date.  If you haven’t issued this legal notice to your staff then you can’t postpone, and contributions are due from your Staging Date onwards.  The sting in the tail is that employer will have to pay not only their own backdated employer contributions but also the employee’s backdated contributions.   

‘I have less than 5 staff, so I’m not affected…’   

 

This myth comes from the old Stakeholder pension legislation, which hasn’t applied since 2012.  Workplace pensions are the law for businesses with one eligible employee or more.

‘I’m not complying, and nobody will ever know…!’  

 

Unfortunately, The Pensions Regulator has a direct line to HMRC and they receive regular updates about the employees you pay and how much they earn.  Alarm bells won’t ring at the Regulator’s office until 5 months after your staging date, when they expect to have received your declaration to confirm you’ve set up your scheme.  If a declaration is not sent to the Regulator, this will trigger an investigation.

So what are the repercussions of non-compliance?  A straightforward breach, such as forgetting to complete your declaration of compliance in time, can result in a fine of £400, but if you’ve blatantly ignored the law then the fines are eye-watering, at £500-£1,000 a day for a small business, rising to £10,000 a day for larger businesses.  Swindon Town FC was in the headlines in 2016, having been fined over £20,000 for failing to meet their duties.  

There are quite a few online do-it-yourself pension solutions out there, many of which don’t offer you a choice of pension scheme or publicise their fees and charges until you sign up.  Some pension schemes will charge a set-up fee, others an ongoing fee.  Some schemes are cheap for the employer to set up but have high charges for employees going forwards.  It’s a bit of a minefield.  Business owners must be able to justify their choice of scheme to their employees if challenged, but unless they fully understand what they’re signing up to, then how can they?

Our Bespoke, FastTrack and Simply Conform solutions are tailored to suit any size of business and are aimed at business owners who would rather not do it themselves.  We’re independent of any one pension provider so we can help you to choose the right scheme for your staff and your budget.  And we do it all for you to save you time, ensure compliance, and get the right messages out to your employees.  We can also help out on the payroll side as we run a busy payroll bureau – our pensions knowledge certainly comes in handy here!

If you would like to talk through your circumstances with an auto-enrolment expert, please give us a call on 0800 160 1233 or email slw@aebureau.com .  We’ve got lots of useful information and guidance on our website if you need it: http://www.aefasttrack.com/



Missed Your Staging Date?

We’ve had an exceptionally busy week last week, including advising and supporting three companies who had missed their staging dates for auto-enrolment.  So we have a topical blog this week in which I would like to explain the consequences of late compliance.


Every company will have a deadline, or Staging Date, by which they must set up their pension scheme if they have one or more eligible employees.  Even if you have decided to postpone the enrolment of your employees, your scheme must be in place by your deadline, because your employees have a legal right to opt-in to your scheme during the postponement period.   

However, if you’ve missed your Staging Date, what can be done to minimise any regulatory fines and repercussions…?  The answer to this depends upon how much time has passed since your staging date.

If your staging date was within the last six weeks, you are able to implement ‘postponement’.   Postponement means that you can delay the enrolment of your employees into the pension scheme for a maximum of three months, but the critical point here is that you must notify your employees that their enrolment is being postponed within six weeks of your staging date.  This notification is called a ‘statutory postponement letter’, and it must contain specific legal wording, including an explanation that an employee can opt in early if they want to.  You must still set your scheme up straight away.

If your staging date was more than 6 weeks ago, then you can’t apply postponement and your employees’ enrolment date will revert back to your staging date.  The employer will be legally required to pay backdated employer contributions from your staging date until the date that your scheme is up and running, and – here’s the sting – the employer will also need to pay all of the backdated employee contributions too.  The employees are not expected to pay their own backdated contributions.   

So if you’ve missed your staging date, act now!  Get advice from a suitably qualified pensions consultant and set up your scheme without delay.  We can help you to choose and set up a pension scheme within 24 hours if needed.

Getting the right advice about workplace pensions is important for employers and employees alike.   If you would like to talk through your circumstances with an auto-enrolment expert, please give us a call on 0800 160 1233.  We’ve got lots of useful information and guidance on our website if you need it: http://www.aefasttrack.com/


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