The new workplace pension scheme – known as Automatic Enrolment – has been enacted because millions of people are not saving for their retirement and are living longer. It is called Auto Enrolment because every employer, with one member of staff or more, has to ensure that all eligible staff are enrolled into a compliant pension scheme. Here are a few things to consider when looking at the impact on your setting:
Who is eligible?
All staff from age 22, and earning from £10,000/year, are automatically enrolled; other staff can opt in under certain circumstances. The earnings threshold is based upon the hours actually worked. Staff are automatically enrolled by the employer, but can opt out. The scheme applies to all employers in the UK, regardless of size or industry.
When does this happen?
This is already in place for businesses with 50 staff or more. From June 2015 there is a staged process
following a published timetable. This will extend the scheme to all businesses with 1–49 staff over the next two years.
What is the cost?
The cost is spread between the employer, the employee and the government. Initially the employer will pay 1% of pensionable earnings; this will increase in stages to 3% from January 2018. In addition there will be fees to set up, and administer the scheme.
What is the impact on you?
If you fail to comply with the scheme then you may face fines, prosecution and a loss of credibility.
What can you do?
The costs of the scheme are additional ones for you. One way to mitigate your costs will be to review all your overheads to reduce waste, increase operational efficiency and obtain better prices in areas such as energy, telecommunications, consumables, IT, water, waste and resources. However, this is a complex area and it is important that you obtain professional advice.