Work Place Pensions: What You Need to Know as a Small Business

Are you prepared for the new workplace pensions rules?

In preparation for the new workplace pensions rules, we look at some of the key things small businesses should know about auto-enrolment.

In 2012 the UK Government announced that all employers will be legally obliged to enter their workers into a workplace pension scheme (auto-enrolment). So, what does this mean for you as a small business owner?

Below we’ve summarised some of the key things you need to know about auto-enrolment

When do I need to set up my pension scheme?
Auto-enrolment came into force in 2012 but it is being rolled out in stages. You will need to
set up a pension scheme by your staging date. This date depends on the number of people you have on your payroll and can be checked at the Pensions Regulator. For existing small businesses, auto-enrolment will come into effect in 2017. If you have an existing pension scheme it may be suitable for auto-enrolment – again, you can check this with the Pensions Regulator.

Who do I need to enrol on the pension scheme?
Anyone on your payroll who is between 22 and State Pension age, earns more than £10k per year and works in the UK will need to be enrolled onto the pension scheme.

What will my contributions be?
You will need to make regular payments into the pension schemes of all enrolled staff. The minimum legal contribution you will need to make for each staff member is determined by that employee’s gross salary. The Pensions Regulator has set up a contributions tool to help you work out how much you will need to pay.

What pension scheme should I choose?
It is really important that you pick the right pension product for your organisation and your employees. There are lots of providers and products out there and the introduction of auto-enrolment has seen even more providers enter the market with simplified and low cost options.
The Pensions Regulator offers guidance to help you choose the auto-enrolment pensions product that works best for your organisation. You might also want to consider consulting a financial advisor for further advice.

Seek further advice
This is a big shift and small businesses are likely to find it more difficult than large businesses which may have the resources and systems already in place. With this in mind it is worth considering seeking advice from a financial advisor with expertise in this area. They will be able to advise you on the different pension schemes available as well as on your obligations and the potential implications for your organisation. It is essential to prepare in advance of your staging date – don’t leave it until the last minute!

Be aware of the risks
As mentioned above, it is vital that you are fully prepared for auto-enrolment. In particular, failing to budget properly is expected to be a significant risk for small businesses – planning early and effectively can help avoid this. If you do not meet your auto-enrolment obligations or do not comply with regulations then you could be fined up to £500 a day.

There is a lot to think about with regards to workplace pensions and auto-enrolment. However, a thorough planning process and sound advice should ensure that your small business is fully prepared and able to meet its legal obligations.

Leave a Reply