Is your small business prepared for auto-enrolment?



Declan Harrington is a financial advisor at Savage Silk, a multi-disciplinary practice that offers financial and legal advice. Here, he outlines what you need to do to prepare your business for the upcoming changes in pension rules.


With its Pensions Act 2008, the government laid out its plans to improve the state of pensions in the UK. The auto-enrolment process began with large companies in 2012, and existing UK businesses of all sizes will have to offer and contribute to workplace pensions by February 2018.

If you own a new or small business that hasn't joined the scheme yet, there are some things you can do to prepare for these changes. Here, I'll outline how you can ensure the transition goes as smoothly as possible.


Make sure you know your deadline

You should already know when your staging date is, as this is when you need to have everything in place for the new auto-enrolment system. If you miss your deadline, you could face fines and penalties from the Pensions Regulator. So, if you aren't sure or have forgotten what your staging date is, it's vital that you find out as soon as possible.

To help you keep track of things, the regulator has created a staging date calculator, which will tell you when to mark it on your calendar. All they ask for is your PAYE reference, so make sure you have it to hand.


Choose a suitable pension scheme

Once you know when your deadline is, you need to choose a suitable pension scheme for your business. I would always recommend asking a financial advisor for help with this, as they'll be able to help you to pick one that works for both your employees and your company.

Your chosen pension scheme must be suitable in the eyes of the Pensions Regulator. So, make sure you read their detailed criteria thoroughly to ensure you choose one that satisfies their requirements. You should also read this if your business already has a pension scheme, as it must measure up to the same standards.



Make sure you know which employees will be enrolled

To be eligible for auto-enrolment, your employees must fulfil certain requirements. For example, they should be aged between 22 and the state pension age. They also need to be earning enough to reach the 'trigger' point in each pay reference period. The government reviews these thresholds every year and you can learn more about that here.

It's important that you know who needs to be enrolled by your deadline, as this will allow you to inform all of the relevant people about these changes. And, it will help you to prevent anyone from missing out.


Be ready for some employees to opt out

Although it's mandatory for you to offer a pension scheme, your employees can opt out if they wish. They'll be given a one-month window during which they can leave the scheme, and they'll be required to submit a notice that the pensions provider will typically provide. Within a month of them doing so, you'll have to refund all of the contributions they've made up to that point.

Any employees who opt out will be automatically re-enrolled every three years. If they still don't wish to have a workplace pension, they'll have to provide you with notice every time.


Know your responsibilities and stay on top of them

As an employer, you'll have a range of responsibilities when it comes to auto-enrolment, and it's vital that you stay on top of them. One of your most important tasks will be to review how much you're contributing to your employees' pensions on a regular basis. This can change if any of your workers are given a pay rise or start to work more hours.

Additionally, you'll have to prove that you're fulfilling your role. To do so, you'll have to show the Pensions Regulator that you've set up an effective scheme for your employees within five months of your staging date. You will also have to show them how you've been meeting your responsibilities. The details that you give them will be checked against your PAYE scheme data, and this process will be repeated every three years. AccountingWeb's guide to a declaration of compliance has all of the information you'll need to ensure you're prepared.

You'll soon have to offer a workplace pension to eligible employees, and it's important that you're prepared. Take this guidance on board and the transition will go much more smoothly.