All firms must offer their employees a pension (regardless of how few people the organisation employs) and preparation for offering pensions can take months, even a whole year. There are heavy penalties for not complying with the rules.
There is a fixed penalty of £400 and a maximum penalty of £50 per day: this can add up to huge amounts. So to ensure compliance and avoid penalties, what do you need to know?
When should I stage by?
To gradually ease all businesses into the pension system, organisations have been given different “staging” dates according to the size of their payroll.
“Staging” simply means enrolment. Large firms are already enrolled, whereas a lot of smaller firms are not yet required to stage. For the remaining un-enrolled firms, those with between 30 and 49 employees must stage by 1 October 2015, and those with fewer than 30 employees must stage by 1 April 2017. (There are some exceptions for new employers.)
You can stage earlier if you want to, but you cannot delay it. If you would like to check your staging date, enter your payroll reference at the following link:
You ought to start arranging a pension scheme a year before your staging date.
What pension should I offer my employee?
Pension advice is a regulated activity and can only be given a financial adviser. However, the following is a description of the different types of pension available to give you the basics before you seek professional advice.
When you think of pensions, there are certain financial organisations that come to mind. Long-standing pension providers do offer auto-enrolment compliant pensions. They may require a minimum number of employees and a minimum contribution each month. If you or your employees are already contributing to a pension scheme, do not assume it is auto-enrolment compliant: you might need to change schemes or start a new one.
National Employment Savings Trust (NEST) is the government backed scheme designed for small businesses with few employees earning low to moderate salaries. It is a not-for-profit scheme and acts as a safety net to scoop up employers who aren’t set up for other pension schemes. Contribution rates are currently capped and you also can’t transfer pensions from other schemes.
Some pension schemes have been set up for particular industries.
Don’t worry if you are confused by the variety of pension schemes on offer. Your pension adviser will be able to suggest which would be the best for you and your employees. The most important thing is to know your staging date, and start organising a pension scheme in ample time.