Guest blog - Mike Rohan, Sage
Bio: Mike Rohan is the Business Development Manager for Sage and is co-chair of ‘Friends of Auto Enrolment’ in the North East. The Friends of AE (founded by the Chartered Institute of Payroll Professionals) seeks to help employers meet their new duties through co-operation and education.
What is automatic enrolment?
Every employer with at least one member of staff now has new responsibilities, including putting those who meet certain criteria into a workplace pension scheme and contributing towards it. This is called automatic enrolment. It is called automatic enrolment because it is automatic for your staff – they don't have to do anything to be enrolled into your pension scheme, but it is not automatic for you as an employer.
Auto Enrolment is in part a good news story, as a nation we’re living longer than ever before and we are enjoying ever longer retirements. However at the same time, the number of workers paying into the system (and funding the state pension pot) is on the decline. A recent study by the Office of National Statistics suggested that when the State Pension was created, the average pensioner would enjoy a 10 year retirement. Fast forward to 2015 and the average time spent in retirement is 20 years – that figure will only increase over time as people live longer. All told, only 1 in 2 UK workers are saving adequately for their retirement, which means that at it stands every other worker in your office faces an uncertain future in their post-work life.
Sounds easy enough, but...
The thinking behind this legislation is breath-taking in its simplicity, it’s called Automatic Enrolment for a start - things that are automatic are usually fairly simple to facilitate. Every UK employer must assess their workforce and enrol Eligible Jobholders into a Qualifying Workplace Pension Scheme. The employee and the employer both make contributions to the employee’s pension and the Government contributes in the form of tax relief. That sounds easy enough, until you start to question around…
“What is an Eligible Job holder?”
“What is a Qualifying Workplace Pension Scheme?”
“What if a worker doesn’t want to be part of a scheme?”
In most organisations, the task of ‘sorting’ Auto Enrolment will probably be given to the person that produces the Payroll and at this stage it’s probably fair to say most will have a knowledge gap in this area. If you’re that person then there are some steps that you can take to help you on your journey to compliance.
- Find out when the legislation affects you. You can check your “staging date” by clicking on the link to the Pension Regulator’s website below. You’ll need your ‘PAYE’ reference number to hand and it should take no more than 30 seconds, this gives you a deadline to work backwards from. http://www.thepensionsregulator.gov.uk/employers/staging-date.aspx
- Take the time to understand the legislation and what it means for your organisation. You have to carry out certain tasks by specific dates and a failure to do the right things at the right time can lead to fines. AE is administered by a Government body called The Pensions Regulator and their website for employers is an excellent place to start. If you don’t have the time to do the research, you might want to outsource this part to a trusted advisor such as Financial Adviser or Accountant.
- Consider the costs of calculating the pension contributions (there are various methods) and agree on measures of success for your organisation. This will then determine whether you are in a position to just cover the minimum required by law or potentially offer something over and above for your staff. If you operate in a competitive sector and want to attract and retain the best staff, you may want to consider revamping your wider employee benefits package at the same time and look to offer things like childcare vouchers, cycle to work vouchers and so on.
- At some point you will need to select a pension provider, your choice of provider is important because that’s where your employee’s contributions are invested and they will no doubt want a good return on their money. There are other considerations too, such as whether providers offer choices that are compatible with your workforce. For example your employees might want to invest their money in an ethical fund or might want the option to invest in a sharia fund – not all providers offer these choices and so due diligence on your part is important. If you don’t feel comfortable making these recommendations then you could seek outside help from someone with the pensions expertise who can look at your needs and recommend the best fit.
- There is a lot of compliance involved with Auto Enrolment. Employees have to be assessed, letters produced and contributions calculated - the most efficient way to achieve this is via your Payroll function. If you outsource your payroll ask your provider if they can do these tasks for you, if you produce your own payroll (using something like Sage 50) then ask your current provider if your software will support you through Auto Enrolment.
We are running a free seminar in Newcastle on 21st October for employers in your sector, which aims to educate and help you in your first steps on the way to compliance. There will be speakers from a variety of backgrounds who have helped employers like you meet their AE duties over the last 3 years. You can register for the event via the link below and please get in touch with me if you have any questions or if you have any feedback.
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