An Update On Auto Enrolment Pensions

An Update on Auto Enrolment Pensions – Where are we now?

We recently summarised how, in April this year, The Pensions Act 2008 made it compulsory for every employer to contribute to a pension scheme for their staff. This was first rolled out for larger businesses and must now include small and micro employers. The compulsory inclusion of staff earning over £10,000 applies to those between the age of 22 and state pension age, though those between 16 – 22 and post state pension age up to 75 can choose to opt in.

Are employers adhering to the new pensions legislation?

In simple terms, not everyone is following the rules. Although staff members are not required to do anything to be enrolled onto a workplace pension, the same was not true of the employers. Many employers have taken steps to ensure they are fully meeting their responsibilities and adhere to the new legislation, there are a proportion who have not, either consciously, or through a lack of understanding. The Government have not yet completely achieved it’s aims despite the ‘Don’t ignore the Workplace Pension’ awareness campaign featuring ‘Workie’– a giant pension mascot – with a reported 2,500 whistleblower reports made to the Pensions Regulator during the 2015-16 tax year, a 29 per cent rise on the previous year, as well as having to launch almost 9,000 enforcement actions over the same period.

What happens to employers who do not offer an auto enrolment pension?

The change in legislation was brought in to help give employees the opportunity to invest in their future, and, in the absence of a state pension that will cover all their needs, the ability to provide for themselves and their families in retirement. There are a significant proportion of businesses who are complying to the new rules and are providing over and above the minimum pension required, but for those who do not, fines will be given. Dependent on the individual case, fines for employers range from £50 per day of non-compliance for businesses with one to four employees but rises to £500 a day for those with five to fourty-nine employees, and so can quickly add up to a hefty sum if ignored.

For small businesses with a sole shareholding director, and no other employees, an exemption applies, though as soon as those circumstances change the duties begin and a pension scheme will need to be set up and be paid for on behalf of the employees.

Do not find yourself caught out by the auto enrolment pension scheme, ensure that you comply and offer your employees the correct scheme for their needs. Newton Magnus are experienced and reputable accountants and financial advisors in Dorset, we can offer assistance in all aspects of financial management for your business, whether you are a large corporation or a small start-up. Talk to us today for sound, sensible financial advice.