As of April 2017 all existing business will have to comply with new workplace law and will be required to automatically enrol certain staff into a workplace pension scheme. The date each business has to comply with the rules was set in April 2012 and is known as the company’s “Staging Date”.
We have helped many businesses get ready for this, an example of which is detailed below;
Andrew and Dan run a small software company that is in its 4th year of business. The company is doing well and over the last year they have employed additional staff due to the growth of the company. They have a Group Personal Pension that they currently offer their staff where they pay in 2% of salary, however only 10 of the staff are currently in the scheme.
Andrew and Dan feel that they may already be meeting their duties for Auto Enrolment however, they are unsure as not all staff have currently opted to join the scheme. They have a number of questions as follows:
- Company: All-Software
- Staff members: 15
- Existing pension scheme: ABC Insurance Group Personal Pension
- Existing contributions: 2%
- Staging date: 1 January 2017
As All-Software have an existing pension scheme does this mean they are already meeting the requirements?
No, not all schemes are ‘qualifying’ or can be used for Auto Enrolment.
If the scheme is or can be made ‘qualifying’ there may be additional charges and changes that could be applied by the provider. Also as not all staff are in the scheme Andrew and Dan will need to decide if they want to use this scheme for the existing members or for both existing members and new joiners. Some existing schemes can be used on a contractual basis when staff are already enrolled under their contract of employment and therefore, would not have to be auto enrolled.
As there are 5 staff not in the scheme they will need to be assessed and potentially be automatically enrolled. If the scheme is not qualifying they will need to find a new pension scheme that will allow them to automatically enrol the members that meet the criteria.
When should they start looking at their Auto-Enrolment?
As soon as possible is always good to be aware of what you will have to do however, we usually recommend around 9-12 months prior to the staging date.
Is All-Software paying the right amount of contributions?
There are two different basis options for the company to choose from with regard to contributions for the staff. The first is known as ‘Qualifying / Banded Earnings’ and the second is a scheme specific definition. Each type has minimum contribution levels that need to be met, these are being phased in and therefore, the current 2% All-Software are paying now may not satisfy these minimums when they are increased even if they do now.
Is there a way that All-Software can change their Staging Date?
Companies can bring forward their staging date if they wish to by applying online at least a month before the date they wish to bring it forward to.
There is also an option to use Postponement, this does not move the staging date however, can delay the date the company have to enrol members of staff by up to 3 months. This can also be used for new members of staff and / or when a staff member first becomes eligible.
Do Andrew and Dan have to automatically put all staff into the pension?
No, there are certain criteria that need to be met before a staff member needs to be automatically enrolled. Andrew and Dan will need to have an assessment tool that will determine this. This can be done through their payroll system or some pension schemes are also able to do the assessment.
If staff do not meet the auto enrolment criteria they can request to join the scheme. All-Software have an obligation to inform staff of the scheme that is available and if they are using postponement or not. Depending on which contribution basis they choose and the employee’s level of earnings if they choose to join the company may have to pay contributions for them.
How do All-Software choose a new pension scheme?
If they cannot or do not wish to use the existing ABC Insurance Group Pension Scheme Andrew and Dan will need to choose a new pension provider. They can do this themselves however, they would need to ensure the scheme put in place is suitable for the staff and the purpose of complying with All-Software’s employer duties, therefore we would recommend they seek financial advice. Boolers offer a range of different services with regard to Auto Enrolment, from a full advice service to smaller workshops to suit all companies.
If you require further information, please contact us:
Email: enquiries@boolers.co.uk
Telephone: 0116 2407070
Website: www.boolers.co.uk
This case study is for illustrative purposes only and should not be construed as advice or guidance. It is based on our understanding of current taxation, law and practice (August 2016), which is subject to change.
