Auto Enrolment for Pensions

A Brief Summary

You cannot ignore Auto enrolment for pensions.

Here is a link to my video https://www.youtube.com/watch?v=_zFGWTpTwHY

Your staging date is the date auto enrolment starts for you.

You need to find your staging date.

Your contributions start at 1% increasing to 3% by 1/10/18.

You have these options:

  1. Get a good pension scheme for yourself and your staff. Take time to create a bespoke scheme that will give good benefits to your staff.
  2. Do the minimum to comply, and create the scheme yourself. The detailed guide below tells you what you need to do
  3. Hand it over to us, together with a pensions expert.

The only companies that don’t have to have a scheme are if:

  1. You’re a sole director company, with no other staff
  2. Your company has a number of directors, none of whom has an employment contract
  3. Your company has a number of directors, only one of whom has an employment contract

In which case all we need to do is tell them

 

Auto Enrolment for Pensions

Detail

Context

The government want us all to save for our pensions so we don’t rely on the state and we have a better time in retirement. It is already compulsory to have a pension scheme if you have more than 5 employees but there is no obligation to contribute, and staff need to opt in. In practice too few people are in a scheme. The government is turning the tables and saying that you will be opted into a scheme unless you specifically opt out of it, and that the employer must make contributions.

You should note that it is against the law to take any action to induce anyone to opt out. Even if an employee opts out you need to re-enrol them periodically.

Administration

There is an administrative burden falling on the employer. This is a summary of what you need to do:

  • Note your staging date. This is when Auto Enrolment starts affecting you.
  • Work out who is going to sort this out for you. You, one of your team, us? Notify The Pensions Regulator.
  • Write to all your staff and explain what is happening.
  • Appoint a pension provider e.g. ‘The people’s Pension’ or ‘NEST’
  • Ensure your payroll process can cope with the change.
  • Assess and enrol your staff.
  • Pay over the pensions, make the appropriate deductions.
  • Complete your declaration of compliance.
  • Enrol new members of staff and re-enrol periodically those who originally opted out

Most people will be automatically opted in, however, it is age and salary dependent:

Monthly earnings  Age: 16 – 21 Age: 22 to pension age Age: Pension age to 74
£486 and below  Right to join a scheme Right to join a scheme Right to join a scheme
Over £486 up to £833  Right to opt in Right to opt in Right to opt in
Over £833  Right to opt in Automatically enrolled Right to opt in

 

Of course most people earn more than £833 pcm and are aged 22-65.

 


 

Cost

As an employer you will be obliged to contribute. The contribution rates will increase over time:

Date Employer minimum contribution Total minimum contribution
Before 30/09/17  1% 2%
01/10/17 – 30/09/18  2% 5%
01/10/18 onwards  3% 8%

 

The £1,000,000 pension limit

A word of warning. For those who have been farsighted enough to have substantial savings in your pensions you might be concerned about the £1,000,000 lifetime limit on your pension, and the 55% tax on amounts above this figure. You may have taken action to lock into the old life time allowances of up to £1,800,000. If you have done this, if you pay even £1 into your scheme your protection will disappear and you’ll be down to a £1,000,000 lifetime limit. You might therefore need to take care not to be auto enrolled. Please speak to your financial advisor.

 

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