Myths of auto-enrolment
Posted on in Business News , Cycles News , Political News
With 500,000 small firms due to introduce workplace pensions, Now: Pensions has released the top five myths surrounding auto-enrolment.
The company says misapprehensions around auto-enrolment are common and says its "myth-busting" will help employers to navigate the changes.
Now: Pensions CEO Morten Nilsson said: "When it comes to auto-enrolment, there's a lot to take in and it's easy to get the wrong end of the stick."
1. Postponement means I don't have to do anything
Employers can postpone auto enrolment for up to three months but bear in mind that you are only postponing assessing and therefore enrolling some or all of your staff, your staging date remains the same.
There are a number of reasons why you may want to postpone. You might employ short-term or temporary staff who you know will be gone in three months or you may want to align auto enrolment with your existing payroll process. But, if you do use postponement, there are a few things you should consider.
As an employer, you can choose to postpone as many or as few employees as you like and the length of the postponement doesn't have to be the same. However, you will need to write to staff you are postponing within six weeks of your staging date. These staff can also decide to opt in to the pension during the postponement period so you'll need to be prepared for this.
At the end of the postponement period you will need to check that the members of staff you have postponed are still eligible for auto enrolment. If they are, you must put them into the pension scheme straight away, you won't be allowed to postpone for any longer.
Postponement can be useful, but should be used carefully and for the right reasons. Whilst helpful in some ways, it can also come with additional work.
2. I can go to any pension provider to set up a scheme
Not all pension providers will welcome every employer for auto enrolment. For some, it simply won't be seen as profitable to serve smaller clients.
But, there are pension providers out there that will accept all businesses, regardless of size, for auto enrolment.
Choosing a scheme is a crucial step and shouldn't be rushed. This decision will affect your business and your staff, for many years to come.
Therefore, when selecting your provider, make sure to do your homework. Will they accept your business? How will they support you? How much will it cost? These are just a few important things to consider when choosing a scheme. Don't make any assumptions!
3. If I miss my staging date, it will be too late
There are pension providers that will accept businesses that have missed their staging date.
However, be under no illusion, missing your staging date is best avoided and could result in fines. In addition to fixed penalties of £400, employers can also face daily fines which could be as much as £500 per day.
If you have missed your staging date, act fast to get back on track.
4. Minimum contributions are enough to provide a comfortable retirement
It's easy to assume that if you and your employees are putting money into a workplace pension scheme at the level mandated by the government, your staff will be able to retire comfortably, but you'd be mistaken. Unfortunately, for most people, auto enrolment minimum contributions won't be adequate.
At the moment, employers and employees must each contribute 1% of an employee's qualifying earnings until April 2018 when employer minimum contribution rates will rise to 2% with employees contributing 3%. By April 2019, employers must pay a minimum of 3% of qualifying earnings per employee into a pension scheme with employees contributing 5%.
5. Contributions are based on every pound of earnings.
For the 2015 / 2016 tax year, auto enrolment contributions are based on earnings between £5,824 and £42,385. That means the first £5,824 of earnings are not counted in the auto enrolment calculation nor are any earnings over £42,385.
However, employers can contribute on every pound of their employees' earnings if they would like to provide a more generous pension, but will need to ask their pension provider to set up their scheme on that basis.
Get the support you need
If you're looking for guidance on your auto-enrolment responsibilities, ActSmart can help.
ActSmart have made arrangements to introduce you to Elliott Sanders of Copthorne Hundred Wealth Management, a Partner Practice of St. James's Place Wealth Management.
St. James's Place Wealth Management are one of the leading wealth management organisations in the UK with a national network of advisers. Using their experience, they offer businesses and individuals a wealth management service, incorporating pension advice. The advice is face-to-face and tailored to your business or personal objectives.
- Complimentary initial consultation
- Face-to-face advice
- Impartial advice
- Advice is guaranteed by St. James's Place when recommending any products or services provided by the St. James's Place Group
Phone Elliott Sanders's team on 01372 721 616, email Elliott.Sanders@sjpp.co.uk or complete the enquiry form here.
