In October 2012, a complex new responsibility began to impact on businesses; the duty to provide a workplace pension scheme for your workers, also known as ‘auto-enrolment’.
At first, a lot of smaller businesses didn’t notice a change, because – as a rule of thumb – the bigger businesses with more employees had to get started with it earlier.
By now, though, if you’re a business with employees, you should have been through the auto-enrolment setup phase. You should already:
- Have in place a qualifying workplace pension scheme
- Have assessed all your employees to decide whether they need to be enrolled (and be assessing every new starter in the same way!)
- Have enrolled all employees who were assessed as eligible to be enroled
- Have written to every employee (in some cases multiple times)
- Have been calculating, processing and paying over the appropriate contributions to the scheme you set up
- Be doing all the above in accordance with various deadlines!
So, what’s next?
In April this year, we’ll see further change as we finally reach the full auto-enrolment pension contribution rates. The rates will increase to 5% worker contribution and 3% employer contribution
The contribution rates were phased in gradually from 2012, starting at just 1% each for the worker and employer. This allowed employees and employers to get used to the auto-enrolment and contribution idea, and it worked; take-up rates have been high, with fairly few employees opting out.
There’s also a three-year cycle of re-enrolment which employers must go through to ‘mop-up’ any workers who originally opted out but have now reached a stage where they want to be in again (Hokey Cokey, anyone?)
And will there be more changes?
Almost certainly. According to the Department of Work and Pensions’ (DWP) “Automatic Enrolment Review 2017”, the government’s ambition is to implement more changes in the next few years, bringing more employees into the scope of auto-enrolment.
It also plans to scrap the current lower limit to qualifying earnings, which sees the first £6,032 (current tax year) of earnings being taken out of the contribution calculation. Again, the timescale for this change is the mid-2020s.
So, it seems that saving for your own retirement is becoming the rule rather than the exception, and that makes auto-enrolment a success story.
My parting words of wisdom? Smart businesses need to build the costs and admin associated with auto-enrolment into their strategy, as auto-enrolment workplace pensions are the new normal – and they’re here to stay!
Have you read this and think you might need a chat about auto-enrolment pensions as an employer? Get in touch with us and Jennifer will be happy to help.