The next instalment of our guest blogger series sees Kate Kennett discussing how to implement a correct auto-enrolment process. (Ed Scrivener)
Getting the auto-enrolment pension scheme right
By now many large companies would have had the task of enrolling their employees into the government pension scheme. For companies still awaiting their start date, navigating the auto-enrolment pension scheme doesn’t need to be complicated, take the time to plan for implementation and on-going management.
The first step for planning and successfully implementing your auto enrolment pension scheme, is to find out when your company “staging” or start date is and which employees are eligible. The staging date is determined by the company PAYE size as of the 1st of April 2012. All employees that are over the age of 22, within the state pension age and earning above the tax free allowance (£9,440 for 2013-2014) must be enrolled by the allocated start date.
If your company already offers a pension scheme you must assess whether the existing pension complies with the auto-enrolment requirements. If the current company pension solution does meet the requirements of the Government pension scheme, employees must be informed of this in writing two months prior to the start date. Eligible employees that may have previously decided not to contribute to the company pension solution will still need to be enrolled, even if they wish to opt out at a later date.
Companies that do not currently offer a pension scheme, or offers a scheme that does not meet the auto-enrolment requirements, will need to find a pension provider that will be able to meet their needs.. This may be a good opportunity for companies to look at offering a more comprehensive and competitive employee benefits package alongside their pension scheme.
According to pensions minister Steve Webb, auto-enrolment has a “chance of being the government policy that succeeds and is popular” however in order for it to be successful employers need to ensure that employees don’t opt out of the pension scheme. Employers that make the pension scheme more attractive, whilst offsetting costs will help to create a competitive employee package.
Forward thinking companies will look to increase the pension scheme contributions, going beyond the compliance minimum. Not only will these companies offer a competitive pension package, but will help to put the company in good stead for when the pension contributions reach a steady state minimum of 4% contribution from the employee, 3% from the employer and a 1% tax relief in October 2018.
Providing comprehensive communications regarding auto-enrolment is a requirement and vital to ensure employees don’t opt out. Prior to the pension scheme, the number of employees contributing in to company pension in the UK was the lowest seen since the 1950s. Many employees may never have contributed to a pension before and so it is important to communicate both the costs and benefits of safeguarding their future in retirement.
About the author
Kate Kennett is a social media manager writing on behalf of Enrich Benefits.
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Discuss HR is the HR blog written by members of Human Resources UK, the 10,000 member strong LinkedIn group dedicated to the HR professionals in the UK. Discuss HR is published twice weekly and looks to take an insightful, informative and sometimes irreverent view on the world of HR – all with the purpose of generating a discussion.
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