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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.
It’s fair to say that the most important decision you’ll make around auto-enrolment is the choice of pension scheme for your employees. Selecting the right provider at the outset can potentially save you and your employees many thousands of pounds over the lifetime of the scheme. So how do you go about choosing the right scheme for your business?
The government imposed a cap on charges for workplace pension schemes of 0.75% to make sure they offered good value for money - this is called the Annual Management Charge (AMC) and it’s a charge against your employees’ funds each year. Many providers have set their AMC at the top of the cap, but if you shop around you’ll find quite a few ranging from 0.5% up to the cap.
It can be quite tricky for a normal person (i.e. a non-pensions geek) to find out what a pension scheme’s charges are, because they’re not always clearly evident on the provider’s website. And the AMC isn’t the only charge to think about. Some schemes charge a monthly fee to the employer to use their scheme, which can be as much as £100 a month; others charge the employer a set-up fee, which is payable over and above any advice you may receive from your advisor. It’s well worth doing the research to find out what’s best for your business, or appointing an experienced advisor who can find out for you.
But it’s not all about charges – you need to know that the provider is well-established and their business is well governed. You want to make sure your employees’ pensions are in safe hands. You should expect a broad investment selection and good, steady history of performance. Customer service and payroll integration are also important factors in saving time and costs going forwards.
Understand what you’re signing up to – is it a master trust or a commercial provider? Many master trusts are not-for-profit organisations and all are set up as occupational pension schemes, governed by Trustees who must act in the best interests of their members. Commercial providers are for-profit and are set up as personal pension schemes. Your advisor will be able to explain the pros and cons of each, but it’s important that you understand what type of scheme you’re signing up to.
So the message is clear: don’t just go for an easy ‘default’ option - it’s really worthwhile spending a bit of time at the outset to choose your scheme carefully. If you think you might need to set up a scheme, or would like to talk through your circumstances, please give our friendly and experienced team 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/
You actually have a couple of options – either do some fairly extensive research yourself and set up your own scheme with an online DIY solution - you’ll need to choose your scheme very carefully - or you can ask a specialist like us to do the job for you. If you don’t know anything about pensions it’s really difficult to know which route to go down, so I thought I’d just outline very briefly what you’d need to do if you do decide to DIY.
First of all you need to choose your scheme – there are well over 100 pension providers to choose from. Make sure you choose a scheme that’s approved by The Pensions Regulator or the FCA, and if you’re choosing a master trust then make sure it meets the Master Trust Assurance Framework set out by the Regulator, otherwise it could encounter serious problems when the Pensions Bill comes into force this year.
Compare scheme costs – employee charges, employer charges, contribution charges and administration charges. These can be quite hard to pin down as providers don’t always make them obvious on their website, but there will definitely be costs involved. Make sure you’re clear on what the costs are to you and your employees before you choose your scheme.
Look at investment performance and compare performance of each scheme over the last 3 years – has investment growth been slow and steady, or more risky and erratic?
You’ll need to design your scheme in terms of tax relief basis for employee contributions, postponement policy, salary and contribution combinations (which directly affect the contribution rates you’ll need to pay) and auto-enrolment pay reference periods. You’ll also need to make sure that your pension scheme integrates smoothly with your payroll software. Designing your scheme properly at the outset will save your business an awful lot of money in the long run.
It’s a good idea to provide your employees with clear and comprehensive communications about the benefits of your chosen pension provider so that they understand the value of the pension scheme you’re providing, and you’ll need to update your employment contracts and, if you have them, your staff handbooks.
It’s really important that you understand the processes behind auto-enrolment so that you know exactly who is responsible for each process. For example, who will be carrying out employee assessments each pay period, who calculates employer and employee contributions, who is responsible for producing and issuing statutory employee letters, who will be uploading a contribution file to your pension provider each week or month and who is going to deal with opt-ins, opt-outs and contribution refunds. You payroll administrator may offer to carry out these tasks on your behalf, but they may only choose to do some of this administration, in which case you need to pick up the rest.
One of the most critical things to get right is to provide your payroll administrator with clear instructions about how to administer your scheme through their payroll software. They will need to know how you’ve designed your scheme and who you’ve chosen.
If you don’t have the time to do all of this yourself, we can do it for you! We’re qualified workplace pension specialists and we’ll make sure you get it right first time. We charge a one-off fixed fee which is dependent upon the size of your business, and we’re happy to continue answering any questions you may have for the foreseeable future too, at no extra cost.
If you’d like to take the pressure off yourself and appoint a trusted, specialist company to help you instead, please give me or Adele Webb a call on 0800 160 1233, or fill in your details on our Get Started page and we’ll get back to you.
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!
During the spot checks the Regulator will investigate any non-compliance, help employers get back on track or take enforcement action where necessary. The Regulator has made it clear that deliberate non compliance won’t be tolerated.
So if the Regulator comes calling, what can you do to ensure you’ve complied? Here are a few quick pointers:-
If you’re worried about compliance and want to get it right, please get in touch, and if you’ve found this video useful please like our Facebook page and follow us on Twitter.
Workplace pensions – there’s no need to miss your staging date…!
Recent research by Aviva has shown that one in seven companies who set up pensions with Aviva in the last quarter of 2016 actually missed their deadline, or Staging Date, for setting up a workplace pension. By my calculations, that means on average around 15% of businesses aren’t complying with their legal duties on time and are very likely to receive a fine from The Pensions Regulator. This is just money down the drain for a small business, and so easy to avoid if confronted early on.
The Pensions Regulator is sensibly recommending that companies set up their schemes around 6 months in advance of their deadline, which is good advice, because 2017 is by far the busiest year for pension providers, with 750,000 companies being allocated a staging date. Some providers may have a long waiting list this year, and any delays in setting up your scheme may lead to a failure in meeting your deadline and a subsequent fine – no excuses.
I suspect that companies are leaving their workplace pensions on the ‘to-do’ pile until the last minute, and then they find that choosing and setting up their scheme, if done properly with thought and consideration for a good employee outcome, takes a lot longer than they thought.
But this doesn’t surprise me – I’m a small business owner myself – and I can certainly sympathise. Small businesses are often stretched to capacity, and it’s likely that the responsibility for workplace pensions will fall on the director or business owner, who tends to be the busiest of the bunch! This is where professional advisers come into their own, because they’ve done all of the research beforehand, and if they specialise in workplace pensions then their knowledge and experience will be a great timesaver.
So what if you do miss your staging date? Well, it’s a legal deadline, there’s no getting around it, so there are repercussions for your business. If you’re within 6 weeks of your staging date then you should issue statutory postponement letters straight away, set up your scheme and enrol your employees within 3 months of staging.
If your staging date was more than 6 weeks ago then you can’t apply postponement and things get a bit more complicated. You’ll need to set up your scheme straight away and work out the contributions that should have been paid into the scheme since your staging date, and it’s likely that the company will also have to pay the backdated employee contributions too.
Towards the end of last year The Pensions Regulator confirmed that there had been a staggering rise in penalties for small businesses for non compliance, with more that 20 times more businesses getting an escalating penalty notice than in earlier quarters. An escalating penalty notice imposes a daily fine of between £500 and £10,000 a day, so best to be avoided!
If you’re getting close to your staging date and haven’t had time to sort out your workplace pension, we can turn things round quickly and easily, taking the pressure off you. We’re here to make sure that you choose a quality scheme and we’ll help you to design your scheme to keep costs and administration to a minimum.
If you need help, please call Sarah or Adele on 0800 160 1233 or fill in the Get Started page on our website and we’ll get back to you straight away.
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What do our customers think..?
"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