More and more industry experts are warning SMEs that they should be taking time to prepare for pension ‘auto-enrolment’. Most firms will have to enrol their employees into a pension scheme, and make contributions, unless the staff member decides to opt out.
What are the new rules?
Under relatively recent Government legislation, by a certain date, the majority of firms will have to automatically enrol their staff into an eligible pensions scheme. Each firm’s staging date (the date by which a pension scheme must have been set up) varies according to the number of employees the company has.
The UK’s larger firms already had to prepare for auto-enrolment by this April, however medium-sized, and ultimately, small businesses will have to do the same over the next few years. The very smallest firms won’t have to comply with the new rules until 2017.
By 2015, around 80,000 UK firms will be required to have a pension scheme in place for all employees (the largest firms), but this number rises massively in the following years, as smaller firms come on line. By 2016, 450,000 firms will have to comply with the pensions rules, and 850,000 by 2017.
Head in the sand?
However, many SME surveys show that a large number of business owners remain blissfully unaware of auto-enrolment, and many in the pensions industry are concerned that many small firms will miss their staging date deadlines, or be unable to find a pension provider at the time, due to the massive rise in demand to get a scheme in place.
According to the latest survey, by Now: Pensions, 44% of SMEs have given no thought whatsover to auto-enrolment. Interestingly, 14% intend to ask their accountants for help choosing a provider compared to 4% who expect to ask an IFA for help when the time comes.
Derek Miles, chief executive of Aspira, an employee benefits firm, said that small firms really shouldn’t leave choosing a provider until the last minute, as some providers have started to turn SME applicants away, such is the demand.
Miles suggests that all business owners should get to grips with their forthcoming obligations, and choose a pension provider at least 12 months in advance of their staging dates.
“All those companies that stick their head in the sand and ignore the letters from the pensions regulator and HMRC should be prepared for a fine because nobody is going to pick them up and help them.”
Is your business affected?
Auto-enrolment applies to all ‘workers’, i.e. those with a contract of employment in place. However, it does not apply to the ‘genuinely’ self-employed. Limited companies, with a sole director, are excluded, however as soon as the company takes on an employee, both the director and the employee(s) must be enroled.
Try this useful article from Lewis Silkin on who is covered by the auto-enrolment legislation.
For details on the legislation itself, and what you need to be aware of as an employed, visit the Pensions Regulator site for further information.