Last week, the Chancellor of the Exchequer, Philip Hammond, delivered his Autumn Budget speech. From a payroll perspective, there were no big surprises.
The Pensions Regulator and the Department for Work and Pensions have sent employers the clear message, “Don’t ignore the Workplace Pension”. If you don’t remember the adverts with the big, colourful monster, you can still watch them on YouTube. Last week, we witnessed the first criminal convictions for deliberately disregarding this message.
New businesses that make their first payments to employees today will be allocated an automatic enrolment staging date of 1st February 2018. This is the date when they must assess their workers for enrolment into a pension, unless they are operating postponement.
When business owners set up a company pension scheme they need to make a few choices, including deciding how much the business needs to pay into the pension. Many employers understand that this must be at least 1% but few seem to know that there is more to decide than the percentage: do they want 1% of the total wages, 1% of qualifying earnings, or something else?
Automatic enrolment was devised with a long term aim that lots of employees should save meaningful amounts for their old age. That aim was divided up into two sections, each subdivided into steps. The first section is called staging and is bringing in lots of employers and their employees, in stages. This is why the date an employer’s duties start is known as their staging date. So what happens if an employer sticks their head in the sand and ignores their staging date?
In an earlier post I wrote about how pension master trusts could be set up without regulatory approval, leading to a very mixed standard of available workplace pensions. This made it hard for small businesses to know who to trust with their employees’ retirement savings. Since then, the situation has moved on and Parliament has created new powers to tackle the problem.
1) If a worker is eligible you must enrol them (even if they protest)
There are some limited exceptions to this but generally the law requires you to work out which staff to enrol and then do it, even if they don’t want a pension. They can then opt out after you’ve enrolled them.
With the introduction of auto enrolment, employers of all sizes have been compelled to choose pension schemes for their staff. In doing so, they are making a financial choice that affects the long term interests of their employees.