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Auto-enrolment – what you need to know

Piggy bank image with coins to highlighthow auto-enrolment helps workers to save their money for retirement

Auto-enrolment encourages staff to save for their retirement

With life expectancy in the UK rising and millions of people potentially missing out on pension benefits due to not saving enough for their retirement, the Government launched auto-enrolment to make workplace pensions attractive to workers and more affordable for employers. Auto-enrolment makes it compulsory for employers to automatically enrol staff into a pension scheme and the employer must pay money into the scheme. Love it or loathe it, auto-enrolment looks here to stay. It is now currently being rolled out to small businesses and will apply to all employers by 2018.

Auto-enrolment: the facts

So how ready are you for one the biggest shakeups to workplace pensions in many years? We give you 5 key pointers to make sure you’re prepared:

  1. Know your staging date – your staging date is the date your auto-enrolment responsibilities come into effect. You need to be ready for this date. It is based on the PAYE data provided to The Pensions Regulator (TPR) by HMRC on 1st April 2012. You can click here to find out your staging date.
  2. Have an auto-enrolment plan – TPR recommends preparing for auto-enrolment at least 6 months before your staging date. It can be quite complex so it’s vital you do your research and decide what type of solution is best for managing your auto enrolment process. The sooner you start planning, the easier the transition will be.
  3. Choose a provider carefully – does your current pension provider qualify under the new workplace pension laws? If you need to open a new pension scheme, start by considering exactly what you are looking for and then compare offerings, costs and benefits. To identify a good quality scheme, the National Association of Pension Funds (NAPF) established the Pension Quality Mark (PQM). Schemes with this mark have attained the highest standards with regard to governance, low charges and good member communications.
  4. Understand your contributions – there are different bands of minimum contributions. Until the end of September 2017, the total minimum contribution into a scheme for each qualifying employee is 2% of basic pay, made up of 1% from the employer and 0.8% from the employee, as well as 0.2% tax relief from the government added on. This increases from October 2017 to reach 8% in total by October 2018 – with the minimum employer contribution set at 3%, with 4% coming from the employee and the remaining 1% coming from the government in the form of tax relief. You can find both employer and employee contribution levels using The Pensions Regulator’s tool.
  5. Budget accordingly – according to the International Association of Book-keepers, one in five small businesses worry that auto-enrolment will force them to lay off staff or freeze pay, with many more saying it will reduce profits and see price rises for customers. Budgeting for your staging date is therefore essential. To begin with, contribution levels are set low but as you can see above, they will rise to 3% by 2018. Forewarned is forearmed and now is the time to start budgeting to safeguard future contributions.

Inspira can help you choose the most appropriate scheme and support you with setting up your pension scheme by doing all the initial administrative tasks as well as ongoing monthly support. We will be offering our clients a range of support options to choose from, depending on how much they wish to take on themselves and how much they wish to pay.