By Andy Agathangelou, head of pensions at The Chartered Institute of Payroll Professionals
Tip #1: Understand the Context
Pensions Auto Enrolment (PAE) is the government’s strategy for getting millions more people into pension schemes – you’ve probably seen the “We’re all in!” ads on TV, featuring celebrities including Dragons Den’s Theo Paphitis. PAE means that those with adequate age and earnings must be automatically enrolled into a pension scheme that they and their employer must pay in to.
Tip #2: Understand your Employer Duties
It is vital that you understand what you must, and must not do. A key point is that whilst employees have the right to opt out of the pension scheme once they have been automatically enrolled, employers must not in any way encourage employees to do so.
Tip #3: Understand the Terminology
PAE is terribly complex and there is a whole new vocabulary of technical terms to get to grips with, such as Eligible Jobholder, Non-Eligible Jobholder and Entitled Worker. You’ll need to understand the significance of these terms, and many more to comply.
Tip #4: Understand the Operational Impact
There will be a great deal of initial and on-going administration involved. Whilst you can outsource much of the admin, processing, record-keeping and so on the employer remains responsible for everything being done properly.
Tip #5: Understand the Financial Impact
To manage cash flow you will need to forecast how much your business will be paying in to your employees’ pension schemes and you will also need to account for the cost of advice and extra administration.
Tip #6: Understand the Consequences of Non-Compliance
There is no wriggle-room for employers – even the very smallest must comply. The Pensions Regulator can impose fines – the level determined by the severity of the breach and the number of employees. For example, firms with 5 to 49 employees that do not comply are looking at fines of £500 per day.
Tip #7: Know your Staging Date
This is the term that describes the date by when you must comply – the larger the firm, the sooner it will be. It is advisable to start preparing for Pensions Auto Enrolment at least 6 months ahead of your staging date.
Tip #8: Understand You Might Not Get the Help You Want
Because every UK firm will be effected by PAE there is real concern about a “capacity crunch” i.e. there not being enough help available for employers from consultants, advisers and so on. Engage with your advisers as early as possible.
Tip #9: Understand How Ready You Are
The CIPP has produced a Self Assessment Exercise that will help you understand the key issues and evaluate if you have done enough to prepare. Enquire through www.cipp.org.uk
Tip #10: Understand Where to Go For Further Details
As you will have realised this is a complex, challenging and potentially very costly issue for businesses. A great source of further information is The Pension Regulator’s website: www.thepensionsregulator.gov.uk/automatic-enrolment