I am the director of a small company that currently offers no formal pension arrangement for its employees. I gather I will be obliged to do something in the near future. Please would you confirm what my obligations will be and when they will come into effect?
The Government is introducing new rules regarding workplace pensions which will mean every employer, no matter what size, will have to put in place a facility to automatically enrol all their eligible employees into a pension scheme.
It is inducing a new pension scheme to help facilitate this called Nest (national employment saving trust). Employers will have the choice of using Nest or putting in place an alternative qualifying pension scheme.
The aim of these new requirements is to try to increase pension savings within the UK workforce.
There is a sliding timescale for implementation, starting with bigger employers in October 2012. Being a small employer (with less than 50 employees) you will have to meet the requirements sometime between July 2014 and February 2016, the exact date depending on your PAYE reference.
As these new requirements could have quite an impact on cashflow for a small company, you need to verify the date and plan ahead.
As well as a phased-in implementation date, there will also be the ability to phase in the amount of employer contribution gradually (within set limits) which could help with company cashflow.
As an outline, you will be obliged to automatically enrol all eligible employees into the pension scheme within a set time period.
Any employee can opt out if they wish but you will then be obliged to automatically re-enrol any such employees into the scheme every three years thereafter.
Employees who are not classed as eligible can request membership of the scheme and you will be obliged to give them full information and enrol them should they want to join.
There will be set amounts that you have to contribute for each employee, expressed as a percentage of a set range of qualifying earnings.
However, the percentages change depending on the definition of earnings that you use, that is, whether you include overtime, commission and bonuses. If you have employees with irregular earnings, then this can get quite complicated to work out.
As you would expect, there will be record-keeping that you will need to do on an ongoing basis regarding scheme members, opt-outs and contributions made, to name but a few.
With a small number of employees and a low staff turnover, this will hopefully not be too onerous but resources will need to be considered.
There will also be strict time limits that will need to be adhered to in terms of payment of contributions so a robust system will be needed.
So, going back to your original question above, I am afraid I cannot give you precise details of the dates without further information from you. In terms of what you should set up, I would suggest an assessment of your workforce pay structure against the admin burden of different contribution levels before deciding on the best route for your company.
Emma Duncan is director of Thameside Wealth Management