Small businesses: get preparing for pension auto-enrolment

With the phasing in of auto-enrolment pensions reaching companies with fewer than 30 employees by January 2016, small companies need to start planning now to cope with the changes.

All UK employers are required to automatically enroll their staff into a workplace pension if they meet certain criteria. The implementation of the new pensions rules have had more than a few hiccups with a total of 25 UK-based recruitment firms breaching the terms since the legislation began on October 1, 2012.

Although, no details were given regarding the nature of the breaches, examples could include poor record keeping, a lack of communication and encouraging or coercing workers to opt out of a pension scheme.

Auto-enrolment, get your head round the changes.

Auto-enrolment, get your head round the changes.

Therefore, with a £50,000 fine applicable for non-compliance, HR managers and those responsible for pension provision within the organisation are advised to plan ahead by at least 12 months of their staging dates to avoid any troubles.

With staging dates starting from June 2015, dependent upon the last two characters of their PAYE reference, business advisers Waltons Clark Whitehill says the sooner companies address the issue the smoother the process will be.

Heather O’Driscoll, Managing Director of Waltons Clark Whitehill, said: “Auto-enrolment is one of the biggest changes to pensions legislation in decades, and the responsibility upon employers, especially in smaller businesses which do not necessarily have significant resource in that area, is huge.

“It is these smaller companies which will start to come into auto-enrolment in the middle of next year, and they need to start planning now and talking to experts.”

In general terms, auto-enrolment is believed to be particularly beneficial to low-earners because, as long as they stay in, by the time they’re adding a state pension, they are likely to be collecting around two-thirds of their final salary.
But what about middle and higher-earning workers? For them, the big question remains whether consistent auto-enrolment contributions will be enough to deliver decent retirement outcomes. Or would using the funds to invest independently in stocks, savings and property be more feasible?

Many critics of auto-enrolment complain that the amount the employer and the employee contribute should be scaled according to age. The argument being that as a young twenty-something, the pressures of climbing the property, career and credit ladder are more pressing, when you are older, and ideally more settled, you can afford to make a bigger contribution. Additionally, people need to be educated on the nature of pensions from an early age because making people aware of what is a suitable and realistic pension can help inform their decisions.

If you are interested in learning more about auto-enrolment why not look to AAT’s  national branch network. The branches provide an excellent opportunity to keep up to date with your CPD as well as offering the chance to meet AAT peers in your area. We cover a wide range of topics with highly respected speakers, and all of our events are free. View events in your local area.

 

Jermaine Haughton is a journalist and digital media professional.

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