Auto-enrolment is already upon us. Larger employers have been enrolling staff into workplace pension schemes since October 2012 and those with fewer than 800 staff will have to do so between now and April 2017.
There are a number of important issues organisations will have to address to ensure they are ready for auto-enrolment. These include making sure the chosen scheme, whether an existing or new plan, qualifies under the rules of auto-enrolment, identifying which employees are affected, providing the statutory information to them, the pension scheme provider and The Pensions Regulator all within a prescribed timeframe, and making the necessary payroll arrangements.
An important starting point is to understand the timeframe to which you will be working. This includes finding out your staging date. The Pensions Regulator will write to all employers to confirm their staging date a year in advance. This date cannot be changed, but you may decide to delay your staging date by up to three months to give you longer to prepare. Alternatively, you could bring forward staging dates if required, as long as you notify the regulator in advance.
The next step is to identify which employees will be required to be enrolled. This will apply to any UK-based employees or contract workers, aged between 22 and the state pension age, who are earning more than £9,440 a year (for the tax year 2013/14). There may also be other categories of employee who are entitled to opt in or join a pension scheme, and employers must provide all these different categories of workers with detailed statutory communications, outlining the changes and when the new regime will come into effect.
Once this is done, you’ll need to select a scheme. While it may be mandatory to enrol employees, employers can choose which scheme they use. This could be either an existing arrangement that is already in place or a new one designed specifically to meet the needs of auto-enrolment, or even a combination of the two. Whichever option is chosen, the scheme must satisfy certain criteria to qualify for auto-enrolment purposes and will need to be approved by The Pensions Regulator.
Auto-enrolment is a legal obligation that cannot be avoided, even if you only employ one employee
Early dialogue with your existing pension provider is essential as they may not want to take all of your employees and separate arrangements may need to be considered for other sections of your workforce. With thousands of employers due to stage in the next three years, the industry is already concerned there will be a “capacity crunch” where demand for pension provision will outstrip current available resources.
A final stage is to draw up an action plan, ensuring that all aspects of the new legislation are being met.
There are penalties for employers who fail to comply with the legislation, which escalate depending on the number of employees. A business with more than 500 staff could be fined as much as £10,000 a day, so it’s worth ensuring your organisation is up to speed on its requirements from day one.
Nabarro LLP is a leading UK law firm which has already assisted many employers with navigating the new regulatory framework, including advising on the employer obligations, assisting with the employer communications to employees, advising on the interaction of auto-enrolment and salary sacrifice, amending contracts of employment, preparing employee handbooks, reviewing existing pension arrangements and negotiating with pension providers, as well as reviewing master trust documents and advising on required amendments .
Nabarro is happy to work alongside your existing benefits consultants, or suggest ones who could help you, to ensure you have a full, commercial and holistic “one-stop” service in respect of all your automatic enrolment needs.
Nabarro has one of the largest and most established stand-alone pensions teams in the UK. All team members are pension specialists and, together with colleagues in other sector departments, can provide expert advice on every aspect of pensions.
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To book a free 30-minute initial consultation to explore your automatic enrolment needs and to request a copy of our detailed guide for employers Automatic Enrolment – A Guide for Employers, contact Kate Richards on 020 7524 6655 or k.richards@nabarro.com
