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10 step guide to setting up a staff pension scheme for your business June 2016

Posted by Alastair Mcdonald on Friday, July 1, 2016

Due to a change in the law, every employer in the UK must put qualifying staff into a pension scheme and contribute towards it. This is called 'automatic enrolment'.

And with the deadline for compulsory staff pension schemes just months away for the majority of small and medium-sized businesses, Mcalistair Accountants is urging business owners to follow these 10 steps ahead of their Auto Enrolment launch date.

1. Don’t ignore that letter

The Pensions Regulator (TPR) writes to all employers alerting them of their duties 12 months before their staging date.

The staging date is when your legal duties as an employer begin. If you’re not sure about your responsibilities, make sure you visit the TPR’s website and take five minutes to complete the onlineDuties Checker.

2. Assess your team

If you employ staff aged between 22 years and state pension age, you’ll need to check whenever you pay them whether their earnings are over £192 a week/ £833 a month (2016/17). If they exceed these amounts, you will need to provide an automatic enrolment pension scheme for them and contribute legal minimums into the scheme on their behalf. This also applies to anyone who starts working for you after your staging date.

If the employee is earning £486 or less a month, then they have a ‘right to join’ a pension scheme. This means if the employee asks for a pension scheme, the employer must provide it but the employer need not contribute.

All other staff have a ‘right to opt in’ to an automatic enrolment pension scheme. If the employee does choose to opt in, the employer must also contribute to the scheme.

3. Don’t delay; plan today

Pension schemes must be registered with the TPR by their specific deadline, therefore small businesses are recommended to start preparing at least six months ahead. Failing to do so can result in initial fines of £400 and lead to daily penalties of £50 to £1,000 per day depending on the size of the employer. There’s also the damage to your relationship with your employees.

To help employers research which scheme meets their requirements or if an existing one qualifies as an Auto Enrolment Scheme, the TPR’s website has a page entitled Choose A Pension Scheme.

4. Need assistance?

Wren Sterling, a national firm of independent financial advisers, can offer all businesses a qualifying workplace pension scheme.

We can also help with the day-to-day running of the scheme, to ensure you comply with the workplace pension laws and leaving you to concentrate on growing your business, please contact us for more information.

5. Look at the bigger picture

As well as budgeting for the set up charges and contributions into the pension scheme, employers need to review how Auto Enrolment will impact on their business as a whole. You should be considering what salary increases and recruitment targets you are planning for the future.

6. Declare your compliance

If you do not have employees but the TPR has sent you a letter, you still need to complete a declaration of compliance. The declaration of compliance informs the TPR that you have met your duties and must be completed within five months of your staging date – if you don’t complete your declaration on time, you may incur a fine.

7. Let your staff know

By law, employers must contact all workers (except those aged under 16 or 75 and over) explaining the process of automatic enrolment into a workplace pension and what it means to them.

This includes staff who are not eligible for Auto Enrolment, but who may wish to go into your pension scheme.

8. Register your staff

Registration of eligible workers for Auto Enrolment should be done within four months of an employer’s staging date. Registration allows the TPR to understand where employers are facing challenges in meeting their duties and enables them to provide the necessary guidance.

9. Bring forward your launch date

Although you can only automatically enrol staff from your staging date, you are able to bring forward this date if you wish.

To do this, you will need to notify the TPR at least one calendar month in advance of your new chosen date and have a qualifying pension scheme in place. You must also have secured agreement with your pension scheme provider that you can use it to comply with your duties from the new (earlier) staging date. 

Prior to the staging date, you can still enrol staff into a pension scheme but you must obtain the consent of the staff to deduct contributions.

10. All systems go

If you outsource your payroll to your accountant or a payroll bureau, they should be able to manage the day-to-day running of your pension scheme but you need to confirm this with them.

If your payroll is managed in-house, you may need to pay for some training on Auto Enrolment for your payroll clerk and will need to check that your payroll software is equipped to deal with Auto Enrolment.




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