The Pensions Regulator’s annual commentary and analysis report states that more than 70% of all new businesses will have staff they need to put into a workplace pension. This statement clearly shows that auto-enrolment has overturned the decline in workplace saving. The number of staff that was saving into a workplace pension has increased to 78% in 2016 from 55% in 2012.
Department of Work and Pensions also reported that 83% of staff are pleased that they are saving into a workplace pension and would welcome an increase in contributions.
From October 2017, any start-up business that is taking on staff for the first time should start planning for their automatic enrolment responsibilities. This planning should be carried out alongside all other tasks associated with running a business. Employers will need to identify a pension’s provider. They should also ensure that its payroll solution is compatible with the scheme in order for the staff to receive the pensions they are entitled to on time.
Employers must complete a declaration of compliance to inform The Pensions Regulator regarding what they have done to meet their duty within five months of taking on staff. If you are an employer, you must be aware that failing to set up a scheme for your new employee will not save you money. This is because contributions will need to be backdated to the date you first employed your staff.
As an employer, you also have an on-going duty to assess staff and keep records. Every three years, if some of your staff has opted out the scheme, they must be automatically enrolled back into the workplace pension. You must then complete a re-declaration of compliance within five months of the anniversary of your staging date.
From 6 April 2018, all employers are required to increase their contributions to at least 2% by law. The staff contributions will also increase to 3% in order to bring the total minimum contribution of 5%.
Contributions will continue to increase in 2019, with employers paying a minimum of 3% and staff paying £5% in order to reach the total minimum contribution of 8%. (See table below)
|Date effective||Employer minimum contribution||Employee contribution||Total minimum contribution|
|Until 5 April 2017||1%||1%||2%|
|6 April 2018 to 5 April 2019||2%||3%||5%|
|6 April 2019 onwards||3%||5%||8%|
Even though the rate of compliance to auto-enrolment is high, there is still a minority of employers that fails to meet their duties. The Pensions Regulator said that they will take action to ensure that staff will receive the pensions they are entitled to. They will also consider taking additional enforcement action against employers who remain non-compliant such as prosecution in accordance with their published prosecution policy.
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