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The AE Fast-Track Blog

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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/


Workplace Pensions and Cost Reduction
If you’re a small business owner with one or more employee, then workplace pensions will no doubt be on your mind!   If you haven’t yet reached your deadline (or Staging Date) for setting up your workplace pension scheme, give yourself plenty of time to address the crucial decisions you’ll need to make around pension scheme provider and pension scheme design.  These two issues are critical for your business and your employees – decisions you make now will have a significant impact on your employees’ pension funds and your own costs as a business owner.

Consider what’s best for your employees

It almost goes without saying that choosing the right pension scheme is a huge responsibility for an employer – get it right and your employees will enjoy a more comfortable lifestyle in their retirement.  If you rush this decision and choose a scheme without doing the necessary research into employee charges, compliance, fund performance and asset-backing, there’s a good chance that your employees will be worse off than they might have been.

Consider what’s best for your business

You have important choices to make around scheme design too – decisions made now will continue for the duration of the pension scheme and will undoubtedly impact on your business costs. 

One area of scheme design that is incredibly useful is ‘postponement’.  Employers are able to postpone the enrolment of employees for up to three months in three different circumstances:

At your Staging Date
For new employees
For existing employees who become eligible

Postponement from your Staging Date is recommended to ensure that your payroll administration fits seamlessly into the process, and you’ll delay the onset of contribution costs for a couple of months.

Where postponement comes into its own is for new employees.  Without postponement, eligible employees will be enrolled immediately but will take your employer contribution with them if they leave within the first three months of employment.  Postpone enrolment for three months and, if the employee has left by month 3, you haven’t lost your employer contribution.  Significant savings can be made if you employ seasonal or temporary staff. 

A robust Pension and Postponement Policy can accompany your employment contracts so that your new employees are fully informed of their pension options, and statutory postponement letters must be issued within 6 weeks of eligibility.

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/


The Pensions Dashboard is Coming!
The take-up of workplace pensions by employees since 2012 has been highly successful.  According to figures released from the Office for National Statistics (ONS) this month, total membership of occupational pension schemes in the UK rose to 33.5m in 2015, up 10% compared with 2014's 30.4m, and this figure will increase significantly again in the next two years as workplace pensions continue to be introduced.

The national average opt-out rate is around 10%, but our own experience at the Auto-Enrolment Bureau has certainly seen a much lower opt-out rate, which is good news because it means that employees in Gloucestershire are really listening to the important messages around pension saving. 

A knock-on effect of these success rates is that there will soon be a huge number of preserved pension pots sitting with pension providers as employees move from one job to another, and one pension scheme to another, and leave their pensions behind.  How will everyone keep track of their pensions?

There’s good news on two fronts.  First of all, the Treasury has confirmed that it’s working with 11 pension providers to release a prototype ‘Pensions Dashboard’ by March 2017, with a view to it going live in 2019.  The Pensions Dashboard will enable people to see all of their retirement savings in one place, collated on one database.  The three main Master Trusts have signed up, together with some of the big commercial providers.  The difficulty will lie in getting all providers to sign up to the dashboard, especially those with dated technology, but it sounds like a great idea in theory and the Government seems committed to seeing this through.

The second bit of good news is that the Government is considering the introduction of automatic transfers, or a ‘pot follows member’ system, to deal with the magnitude of small preserved pots that will be created by workplace pensions.  The idea is that once an employee has left a company and moved on to their new employer’s workplace pension, their old pension will be automatically transferred into the new employer’s scheme.  The details have yet to be confirmed, but I would hope that there would be an opportunity for the employee to block the transfer if they wanted to.  The introduction of this system has been put on the backburner until the roll out of workplace pensions is done and dusted, so some time after 2018.

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/


The New Pension Schemes Bill
The new Pension Schemes Bill was published recently, delivering some very sensible new regulations around Master Trust pension schemes, and strengthening some of the existing rules.

A Master Trust pension scheme is quite different from a commercial provider.   A Master Trust as an occupational pension scheme established under trust and managed by a Board of Trustees.  The Trustees have a duty to act in the best interests of their members, i.e. employees and employers.   

Master Trusts that have done exceptionally well in the workplace pensions market, because even the smallest employers are able to share the cost of good governance, they can access top quality investment managers and benefit from low cost administration.  Master Trusts offer great value for employees too.

However, the regulation around Master Trusts leaves room for improvement.  We only recommend Master Trusts who have adopted The Pensions Regulator’s Master Trust Assurance Framework, which provides an independent annual review of the scheme against a defined set of governance and administration criteria agreed by The Pensions Regulator.  But the Framework is only voluntary at present, and only 12 out of a possible 70-80 Master Trust providers have adopted it.  This is a cause for concern.

The Bill will address these concerns.  It will strengthen workplace pension schemes by insisting that Master Trust providers meet higher operating criteria and standards of governance. Master Trusts will need to prove that they are financially sustainable, that they are run by fit and proper persons and they have an adequate continuity strategy. New powers will be given to The Pensions Regulator to intervene where pension schemes are at risk of failing.  

The bill will undoubtedly drive up industry standards and ensure that pension scheme members are better protected.  It will also help to level the playing field between those who have already adopted high standards through the Master Trust Assurance Framework, and those who have not.  High standards of governance and the safety of member’s benefits must be a top priority for The Pensions Regulator, so the bill is welcome news to those both choosing and recommending workplace pensions. 

As an employer, choosing the right pension scheme for your employees is a big responsibility.  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/


The law is the law!
Over the past week or so we’ve set up workplace pension schemes for an equine veterinary practice, a hairdresser, an estate agent and a golf club, to name but a few.  Whatever your business type, if you employ someone then chances are you’ll need a workplace pension.    

Next year is a critical year for workplace pensions, with the vast majority of small businesses staging in 2017.  The Pensions Regulator estimates that at least 500,000 businesses will need to set up a workplace pension scheme in 2017 alone, compared to the 300,000 businesses who have staged since 2012.   The clear message is to start planning early because there will be quite a long queue in 2017…!    

The Pensions Regulator has issued its compliance statistics for the last quarter, from April to June 2016.  These statistics actually relate to around 30,000 businesses who staged five months prior to this quarter, when staging numbers were still relatively low.  

The Regulator had to use its powers 4,489 times during the quarter, a sharp increase on previous quarters.  Many of the Regulator’s decisions have been challenged by employers at independent tribunals, but none of the appeals that have ended up in front of a judge have been successful and the companies have been fined accordingly.   In every case the judge rejected the employer’s excuse and ruled that ‘the law is the law’ – no excuses!

What can the Pensions Regulator do if you ignore the law?  Well, they can issue compliance notices (3,392 issued to date) telling you to comply or correct what you’ve done, they can issue fixed penalty notices of £400 (861 issued to date) and they can issue daily ‘escalating’ fines, ranging from £400 per day up to £10,000 per day (38 issued to date, including a high profile football club).  

Non-compliance figures are likely to jump hugely over the coming months as half a million businesses tackle their workplace pension arrangements.  To stay under the Regulator’s radar, get the right advice early on from a local workplace pension specialist like The Auto-Enrolment Bureau.  We offer a fast and straightforward service at a reasonable cost – no business is too small!

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/


Workplace pensions, are your employees in or out?

Nobody used to talk about pensions much… how things have changed!  Anyone who runs a business nowadays will have to get to grips with pensions very soon, and most will already have had a reminder from The Pensions Regulator telling them that they’ve got to set up one of these new-fangled workplace pension schemes if you employ one or more eligible employee.  ‘Don’t ignore the workplace pension!’ says Workie, the government’s new and friendly blue and purple pensions monitor.

 

‘But none of my staff will want to join a pension scheme…’ I hear you say!  This might be wishful thinking, because statistics show that around 90% of staff are staying in their workplace pension scheme rather than opting out. 

 

What an employer might not realise is that they still have to set up a pension scheme, whether or not their eligible employees decide to opt out of it – there’s no getting around it.  People basically have to be ‘in’ before they can opt out of the scheme.  Employees don’t have to do anything to be in (that’s the automatic bit), but they do have to fill in a form to opt out.  So is it apathy that’s leading to high levels of take up, or are employees really happy to be in?

 

Being an optimistic pensions geek, I’d like to think it’s the latter.  Employees are getting a very good deal out of their workplace pensions.  Fund charges are low, and not only do they get free money from their employer through compulsory employer contributions, they also get full tax relief on their own pension contributions.  Then there’s the tax relief they receive on investment returns, and 25% tax free cash at retirement.    And you can do so much more with your pension these days, including cashing it all in at once, or taking it bit by bit.

 

It’s not just good news for the employee – the employer gets tax relief too as their contributions can be deducted as an expense, reducing the amount of taxable profit.  And a good pension scheme will help to attract and retain the right sort of people.

 

The difficult bit is getting these positive messages across to employees so that opt out rates stay low.  The loss of the state second pension (S2P) next year will hit youngsters hard, and if they want to retire on more than just the basic state pension then they’d better start saving now!


Employing your spouse? You are still an employer

I met a lovely chap this week, he was a doctor and I had met with him to talk about a workplace pension for his team of medical secretaries.

Whilst we were chatting, he mentioned that he, like many other GPs and consultants, employed his wife as an administrator.  His accountant had advised him that this would be beneficial for tax purposes.  What he hadn’t realised, was that because he paid his wife more than £10,000 a year, he would also need to set up a workplace pension for her.

As this arrangement had been in place for sometime (before April 2012), his Staging Date, the date by which he has to set up a pension scheme, could be anywhere between 1 June last year and 1 April 2017, depending on his PAYE reference.

This doctor has the same duties to his wife as a traditional business, such as coffee shop  or estate agent, with employees.  He must set up a workplace pension scheme enrol his wife, deduct pension contributions from her pay and pay employer contributions on top of her salary.

If he fails in this duty, then The Pensions Regulator has the power to levy some pretty hefty fines.

Hopefully, I made him aware in time, and his staging date hasn’t yet passed, but I’m still waiting to hear.

Even if his wife earned less than £10,000 a year, he would still need to take some action.  See my earlier blog  “I don’t think any of my staff are eligible for Auto-Enrolment, do I need to do anything?”

If you think you might need to set up a scheme, or would like to talk through your circumstances, 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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