Pensions. Its not automatic....

Between April 2014 and April 2017 many companies will be faced with the task of starting the auto-enrolment process. The staging dates have been set by the Pensions Regulator and will depend on the size of the business.

Research conducted by HW Fisher and Company, a London firm of Chartered accountants, showed that over two-thirds of SME’s do not know their auto-enrolment staging date.
Furthermore the survey, which comprised 750 SME’s, showed that 49% had little knowledge of the changes they needed to make, whilst 77% had not yet done anything in preparation for auto-enrolment.

How is the staging date established?

The staging date depends on the number of employees in the business. The staging date for businesses with between 50 and 249 employees is between 1 April 2014 and 1 April 2015. Those businesses with fewer than 50 employees have been set a staging date between 1 June 2015 and 1 April 2017. You can find out your staging date using your PAYE reference.

Preparation

• Employers will need to ensure that they have automatically enrolled all eligible “jobholders” in a pension scheme.
• A jobholder will include permanent, fixed- term and temporary employees, as well as agency workers.
• Employers will be able to use an occupational pension scheme or personal pension scheme provided it meets certain statutory requirements. Or enrol eligible jobholders in NEST, a central scheme set up by the government.
• Once auto-enrolled, a worker will be free to opt out of the scheme. However, for as long as a worker remains an “active member”, the employer will be required to pay a minimum level of pension contributions.

Risks
If a company fails to comply with the auto-enrolment regime, the Pensions Regulator may intervene and require certain steps to be taken or levy financial penalties.

What should employers do?

• First and foremost, you should confirm your staging date.
• For those employers without any existing schemes, you will need to update any pension related wording in your employment contracts, replacing prior wording relating to stakeholder pension provisions.
• For those employees with existing pension schemes in place, then you need to consider whether those arrangements comply with the legal requirements. If, in order to ensure compliance, changes need to be made to the existing scheme then this crystallises a number of important legal considerations and obligations which should not be overlooked - such as the possibility of constructive dismissal claims, breach of contract claims, compensation for a failure to inform and consult and possibly a £50,000 fine from the pension regulator.
• Agreed changes should be documented under a revised employment contract.