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By law, an employer must keep specific records about their pension scheme and also about how their staff have been affected by auto-enrolment each pay period.
In terms of the pension scheme records, you need to keep a record of the pension provider’s name and address, their pension registration number and your employer scheme reference number. It’s also a really good idea to make a note of how you’ve designed your scheme on the same document – so your tax relief basis, your postponement policy, the employee and employer contribution rates (both now and in the future) and the pensionable salary you’ve selected. Chances are, this time next year you’ll have forgotten what you’ve set up and you’ll have nothing to refer to. If you change payroll providers, for example, they will need to know all of this detail.
And then in terms of record keeping for your staff, you need to ask your payroll administrator to produce a comprehensive auto-enrolment report as part of your standard monthly or weekly payroll reports. This report should cover key data, such as the assessment date for each employee, the postponement end date, the employees enrolment date or opt in date, and an opt out date if they’ve opted out of the scheme. Then there’s the pensionable salary used to calculate the contributions, the contribution rates, the amounts deducted from employees’ pay, and the contribution due from the employer.
You need to keep these reports, by law, for a minimum of 6 years, so do keep them safe. I think record keeping is crucial in case a former employee questions why they didn’t have a pension scheme with you, or they question their contributions – you can look at these reports and establish that the employee wasn’t eligible, or they were enrolled and opted out on a specific date.
We cover all of these record keeping requirements for you as part of our pension and payroll service. So if you need any help in designing and setting up your workplace pension, or you’d like to outsource your payroll to us, please give us a call. We’re aiming to be live on Facebook every Friday morning at 11am so if you’ve got any questions please post them in the comments section. Please like our facebook page and follow us on twitter.
We’ve spoken to a number of employers who are keen to get their employees into a workplace pension scheme straight away, rather than waiting for their deadline, or staging date, which is set by The Pensions Regulator.
Why on earth would anyone want to do this any earlier than they have to?! Actually, we’ve come across quite a few reasons why…
One of our smaller clients, a car sales company with 11 employees, could ill-afford pay increases, so they decided to introduce their workplace pension scheme early instead of giving pay rises this year. To do so is more tax efficient for the business. The employees still receive a positive benefit rather than a nil pay increase, and the employer can offset the cost of their contribution against profits, reducing its corporation tax bill.
Pension schemes are a very attractive employee benefit these days, which is why so many businesses have them up and running already. Candidates are becoming increasingly aware of the perks of each job they apply for. You wouldn’t want to miss out on the best employees because your benefits were less attractive than those of a competitor….
Some businesses have more than one PAYE scheme under the company ‘umbrella’. Businesses in this position tend to align later staging dates with their earliest staging date to save time and costs. It’s more practical to deal with all of your businesses in one go and, importantly, it’s helps staff morale if they are all treated equally regardless of the PAYE scheme they belong to (especially if staff share office premises).
A larger client of ours wanted to introduce their workplace pension at the beginning of their company year because that’s when they award pay increases. Aligning your staging date with the start of your financial year can be a cleaner approach from an accounting perspective in terms of setting budgets and calculating pay increases.
If you want to bring your staging date forward, The Pensions Regulator’s website holds a list of possible brought forward dates you can choose from. Visit www.thepensionsregulator.gov.uk for more information.
You’ll need to bear in mind that if you bring your staging date forward, you can’t change it back again – the new date will apply and fines can be imposed if you miss your new deadline.
As always, getting the right advice at the outset is really important. 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/
When approaching your staging date, you need to think about payroll administration and auto-enrolment together, because the two are intrinsically linked when it comes to your workplace pension.
Setting up your workplace pension is only half the story, because it's your payroll software that will need to assess and categorise your staff every time you pay them, it should calculate and deduct the correct level of pension contributions and it will help you to correctly enrol your eligible employees. Your payroll administrator will need to upload a pension file to your chosen provider each month to confirm the contributions to be allocated to each employee.
Your payroll software should generate statutory letters for you because you’ll need to write to employees to tell them how they will be affected by auto-enrolment – are they to be auto-enrolled or can they opt in? How much will it cost? Who is your chosen provider? What must they do if they want to opt out or opt in? These letters are a legal requirement and must contain specific information set out by law.
Don’t assume your payroll software is ready to go. If you run your payroll in-house, chances are you’ll need to upgrade your software to include an ‘auto-enrolment module’ to deal with this administration (often at a cost), and you’ll have to learn a bit about pensions before you can use it – follow the software provider’s instructions to the letter! If you choose the wrong tax relief basis or pensionable salary, for example, it’s a real headache to unpick errors once the contributions have been deducted from pay and paid to the pension provider. And beware: the HMRCs free PAYE tool doesn’t do auto-enrolment at all.
If you’ve outsourced your payroll to a good bureau or your accountant, then should have upgraded their software and done their training, but we’re still coming across the odd payroll administrator who doesn’t offer full admin support and expects you to carry out assessments, statutory communications and data uploads to the provider. If you don’t want to do this yourself, then now’s the time to move your payroll. There are plenty of payroll administrators who will happily do this for you, including the Auto-Enrolment Bureau.
Whether you’re a fast-growing business, or one that’s been around for donkey’s years, if you have one or more eligible employees paid through a PAYE scheme then you’ll need a workplace pension. If your business has been set up since April 2012, then the deadline for setting up your pension scheme will be some time after May 2017, but if your business was established before April 2012 your staging date will be within the next 12 months..! If you haven’t thought about it yet, now is the time to start planning.
There’s been much talk recently about the new Lifetime ISAs, or ‘LISAs’, which the Government plans to introduce from April 2017. LISAs can only be set up for individuals aged under 40 and their main purpose is to provide a tax efficient savings fund with which to buy your first property. Each year, up to age 50, you can pay up to £4,000 into a LISA and, for each £4 paid in, you’ll receive a £1 bonus from the Government. You can draw on the fund tax-free before age 60 to purchase a first property costing no more than £450,000.
Many in the pensions world are wondering why the Government is introducing the LISA whilst auto-enrolment is in full swing – will employees opt out of their pension scheme and set up a LISA instead? I, for one, doubt it. A workplace pension and a LISA are very different beasts and there is clearly a demand for both. People will naturally have different savings priorities over their lifetime.
A quick comparison of each form of saving reveals that, based on the same employee contribution, a workplace pension will provide you with a higher income to draw down on in later life, even accounting for the fact that some of your pension income is taxable, whereas LISA income is tax free. This is largely because of the compulsory employer contribution required for a workplace pension and the tax relief that you receive on your own contribution.
Of course, you won’t be able to access your pension until you reach age 55, so youngsters must approach pension saving as a long term commitment. But if you decide not to use your LISA for a property purchase and want to cash it in, there is an expensive 5% penalty charge to pay and you’ll lose the 25% bonus you’ve received from the Government. So pro’s and cons of each.
Workplace pensions and LISAs should co-exist quite happily as long as employees are well informed and make the right choice for them.
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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"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