Over the next 12 months thousands of small businesses will start to be phased into the Government’s auto-enrolment pension scheme. There is loads of information out there. Just google “auto-enrolment” – you will have hours and hours of happy reading and will probably still be confused.
So here are just 5 facts you really must know:-
- There is no way out unless you sack all of your employees and never employ anyone again. If you are a director with a contract of employment you will probably even need to sack yourself!
- Understand that this is no more than just another employment cost. Auto-enrolment schemes by their very nature can never be good pension schemes. If you really want to encourage and help your employees to achieve good pensions an auto-enrolment scheme on its own will rarely be the right answer.
- This is a payroll and HR issue not a pension issue. You need to establish whether your payroll software or bureau can deal with the auto-enrolment calculations. Establishing which of your employees is an “eligible jobholder”, a “non eligible jobholder” or an “entitled worker” and what their contribution should be cannot be done manually.
- Your starting point should be whoever provides payroll support not your pension provider. Unless you have a small number of highly paid employees already making substantial pension contributions the chances of your existing scheme meeting the auto-enrolment conditions are virtually nil. The problem is that you may find yourself paying substantial fees just to find that out. In my experience to date many employers will finish up with both a scheme providing good pension benefits and an auto-enrolment scheme to meet their legal obligations.
- Be very wary of taking advice from your existing Financial Adviser/Pension Provider. The Auto-enrolment schemes that provide the best value for money do not provide any remuneration for advisers and they therefore have no way of helping you without agreeing a fee structure. With average fees in excess of £150 per hour you could end up with a big bill in no time at all.
So what should you do next? Here is a short list of links which will get you started.
- The People’s Pension – website
- The Pension Regulator – website
- This is Money – article
- Now Pensions – website
Some of you will be able to do all that is necessary online once you have established that your chosen provider and payroll provider can really talk to each other.
If you need some extra help and guidance we will be running a series of workshops over the next few months at our office in Winchcombe, Gloucestershire. This will be for small groups and very much hands on. An on-line version is on the cards but not yet ready to go. We anticipate a large demand so please pre-register by using the “request information” box either on the right or below depending on how you are accessing this blog.
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PS. For the record, my daughter’s business has decided to use Now as their provider (NB – this is not “advice”).
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