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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 email@example.com . We’ve got lots of useful information and guidance on our website if you need it: http://www.aefasttrack.com/
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.
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"We wanted to embrace Auto-Enrolment to get good pensions in place for our team early. We interviewed a couple of companies to assist us, and Sarah gave a very good case for her company. We are confident that we made the right decision! From selecting the right provider, through to setting up the systems and even presenting to our staff, Sarah and her team were excellent. I don't hesitate recommending the Auto-Enrolment Bureau to anyone looking to enrol their company. My only words of advice are, do it early!"
Richard Hardstaff, Director, Polydron (UK) Ltd