Pensions for small businesses explained
Workplace pension law is changing. Each and every UK employer will soon have a legal obligation to comply with the new automatic enrolment scheme.
Under the new laws, employers must automatically enrol certain workers into a qualifying workplace pension scheme and make contributions towards it.
This guide is designed to give employers information on preparing for automatic enrolment and identifying eligible jobholders working for you.
When will automatic enrolment pensions apply to my business?
The new duties will apply to you according to your ‘staging date’. Your staging date is determined by the total number of employees in your PAYE scheme – based on information from HMRC held at 1st April 2012.
Visit The Pensions Regulator’s interactive staging date tool to look it up – you’ll need to have your PAYE scheme reference to hand.
Which employees does it apply to?
Before your staging date you will need to identify eligible and non-eligible workers.
Workers are defined as:
- Those who work under a contract of employment
- Have a contract to perform work or services personally and are not undertaking the work as part of their own business
Eligible jobholders who must be automatically enrolled are detailed as:
- Aged 22 to state pension age
- Working in the UK
- Earning above £9,440
If an individual is a director of a company and the company has no other employees, that individual is not generally deemed to be a worker. The company is therefore exempted from automatic enrolment registration.
Workers who have been automatically enrolled have the right to ‘opt out’ of pension saving.
Key points of the ‘opt out’ policy include:
- Timescale - There is a set timescale within which jobholders can opt out of active pension scheme membership, known as the ‘opt-out period’. Jobholders are required to opt out by giving notice to the employer.
- Notice - The opt-out notice should be provided to the jobholder by the pension scheme; acting as a safeguard to ensure the jobholder’s decision is taken without influence from the employer.
- Refunds - When an employer receives an opt-out notice they must refund to the jobholder any contributions deducted from pay, within specific timescales. Equally, any money paid to the scheme by the employer must also be refunded.
An employer cannot opt out of their duty to automatically enrol eligible jobholders into an automatic enrolment scheme. Opting out only refers to a jobholder’s right to opt out of ongoing pension scheme memberships.
What about the rest of my work force?
'Non-eligible jobholders' have a right to opt in and 'Entitled workers' have a right to join. All have to be informed and records kept.
Existing pension schemes and auto enrolment
In the event you have an existing scheme in use or one that can be adapted for automatic enrolment, it is best to ascertain whether it meets the minimum criteria.
The Pensions Regulator’s qualifying DC schemes tool will help employers find out whether existing schemes can continue to be used.
Liaising with your workers
Employers are required by law to communicate with all workers (except those aged under 16 or 75 and over) explaining the process of automatic enrolment into a workplace pension and what it means to them.
Registration of eligible workers for automatic enrolment should be done within four months of an employer’s staging date. Registration allows The Pensions Regulator to understand where employers are having problems in meeting their duties, to provide the right guidance.
The Government Gateway is the location to register securely and online. It is the employer’s duty to complete registration, but they may authorise someone else to carry out the task on their behalf. For example, they may choose to use their experienced accountant that may already deal with their tax affairs and payroll scheme.
What can TaxAssist Accountants do for me?
At TaxAssist Accountants we are working together with Scottish Widows, one of the UK’s leading pension providers, to create The TaxAssist Accountants Client Pension Scheme, which offers a host of features and benefits for small businesses that are normally only available for larger organisations.
This exclusive scheme is available only to TaxAssist Accountants clients and offers auto enrolment benefits such as competitive charges, flexible transfer and consolidation options and a choice of options upon retirement.