Auto Enrolment: Is Your Business Ready For The Compulsary Workplace Pension?

| October 4, 2013 | 0 Comments

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Though thousands of organisations in the UK have already gone through the new auto enrollment process, if you run a business that employed less than 50,000 people on 1st April 2012 your time is coming next. So it is essential that you are prepared for the new Work Based Pension Scheme.

What Is Auto Enrollment?

Starting back in October 2012, auto enrollment is the new compulsory process whereby every employer has to automatically enroll all qualifying employees into a workplace pension scheme from their ‘staging date’.

Under this process, not only will the employee be required to make compulsory contributions to this scheme, but employers will also have to support their employees in creating a provision for their retirement.

When is Your Staging Date?

The date for every business depends on the number of individuals they employed on 1st April 2012. However, even if you only employed one individual on this date you will still be required to put the systems in place to operate the new scheme.

The fewer employees, the later the staging date. However, by 2017 all employers will be required to have met the minimum requirements and be operating a valid workplace pension, so it is essential to start work now.

What Are the Next Steps?

The first step is to find out when your exact staging date is from the pensions regulator website. When this is clarified you will know exactly which deadline you need to reach.

Secondly, choose the pension scheme that you will offer to your employees. If you have an existing scheme then you must ensure it meets the minimum requirements of the new legislation and that your contributions are sufficient.

Initially employers will be required to make a 1% contribution of gross salary to the scheme, but this will gradually increase until it reaches the target 3% by the end of October 2017.

For those businesses who do not currently offer a scheme, then now is the time to start looking.

All employees over the age of 22 years who earn more than £8,105 will qualify for a workplace pension unless they choose to opt out. So make sure you know exactly who is eligible and budget accordingly.

The employee contribution will also rise on a graduating scale which will be taken at source before tax is applied to their income.

Employee contributions will start at 1% net contribution (i.e. 0.8% deduction before tax relief is claimed) and will increase over the coming years until it reaches a 5% net contribution in October 2017.

Make sure your employees are aware of this change to their income level and that they too are prepared for this change in circumstances.

Above all, start your preparations early. The sooner you start, the sooner you can ensure your business qualifies and meets the criteria that have been laid out.

An independent financial adviser can advise you on all aspects of preparing your business for auto enrollment to ensure that you can meet your staging date with confidence.

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Category: Finance

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