Some myths and traps about the employers autoenrolment responsibilities

Feb 24, 2016 | IFA Blog

Our employees have got their own individual pensions – we know we are going to have to contribute to them

Wrong – while your employees are of course entitled to have their own pensions, and you are quite free to contribute to them this does not exempt you from the requirement to set up a qualifying scheme and enrol all eligible employees in to it and to offer it to any others with or without your compulsory payments depending on individual status.

The 3 % employer and 5 % employee minimums = 8 % will be a big cost

We cannot deny that it is going to cost something but a in minimum scheme  by the time you have ignored everything below the lower earning limit and over the higher earnings limit in the pensionable salary calculations actual totals across the whole salary range are going to b 3 to 7 %, not the headline 8% myth.

We have a good scheme already. We are paying a lot more than the new minimum requirements into it so we are OK

It must be a qualifying scheme. It may be possible to adjust your scheme to qualify, but that will not be the case with all existing schemes in which case you must either adjust the existing scheme if that is possible or set up a new qualifying scheme and comply with all the consultative and documentary rules.

We will not be affected because we have fewer than 5 employees

Wrong – that was the old stakeholder pension rule. Under the new rules it affects you with just 1 employee.

OK but all I have to do is set one up and that will be it

Wrong, it will have to be managed every individual payroll period, weekly, monthly etc. you must be able to identify newly eligible employees who may arise from recruitment, passing their 22nd birthday, a bigger bonus or overtime payment that pay period and so on and enrol them and send them the statutory correspondence.

My employee who does our payroll can do that

In theory yes. But in reality this is going to be difficult, a payroll software system that includes an autoenrolment module really is going to be essential.

So that is OK then, my payroll software will do it all for me

Not necessarily. Most can, but you may need to upgrade or change supplier.

I will manage all the statutory correspondence myself

That’s fine if you want that extra work and responsibility, but most autoenrolment scheme providers will do that for you at no extra charge, and your payroll provider may also offer that service but perhaps at extra cost.

I intend to postpone for 3 months so i have plenty of time yet

Wrong, the law permits you to postpone for up to 3 months beyond your staging date, but you must still have everything completed by that date.

We have met with all our employees and discussed it and agreed that it will be best for the survival of the business if they all opt out

The regulator will take an extremely view about this. In having any conversation with your employees about whether they should opt out, or if they are in the voluntary categories not opt in you have broken the law.

OK, but the pensions regulator is not going to do much about it if I do not comply

Very wrong, they will of course help you if you are really trying to get it right, but if not they will fine you. and ultimately that will not just be a fine, it will be a daily fine until you have complied, which will require back payments for missed contributions. The maximum fines are:

1 – 4 employees            50 pounds per day

5 – 49 employees         500 pounds per day

And if you have more that 50 employees i expect the 2,500 pounds per day fines have bankrupted you by now, but if not you need help urgently.

So, seek advice now and get organised before the rush hits. You will find it very difficult when 90,000 to 100,000 employers per month are coming up to their staging date!

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