Auto-Enrolment into Workplace Pensions Has Begun for the Largest Employers - Now It's Time for All Businesses to Prepare!

The Workplace Pension reforms have begun with the first companies (with 250+ staff) having started auto-enrolment from the 1st October.

Mike Wall

Whilst Automatic Enrolment Duty Dates may still appear relatively far off for companies with less than 250 staff, if you have not started already, now is the time to start planning for these important changes to your workplace policy.

Mike Wall, one of Mitchell Charlesworth's Pensions and Investments Consultants, answers the most frequently asked questions regarding these important changes and outlines an employer's key responsibilities.

What are the Workplace Pension Reforms 2012?

Starting from now, October 2012, employers will be required to automatically enroll all eligible job holders into a qualifying workplace pension and to make minimum contributions into it.

When will this 'Auto-Enrolment' begin for your company?

The Government recently released the revised timetable for auto-enrolment of pensions:

Auto Enrolment Timetable

What is expected now of large employers and what will all employers have to do in the future?

Whilst all firms will eventually be affected, from now, employers with over 250 employees will have to:

  • Provide the Pensions Regulator (TPR) with detailed information about their workforce, their Qualifying Workplace Pension scheme (QWPS) and the statistics of joiners, optouts (employees who do not want to be part of the workplace scheme) and refunds.
  • Auto-enrol eligible jobholders into the 'QWPS'.
  • Contribute to the scheme on behalf of employees. This will eventually be at a level of 3% income (salary + all other earnings) between certain limits.
  • The arrangements for re-enrolment of the opted-out members will need to be reported at this time.
  • Employers will have to re-enrol all employees who opted-out every 3 years.
  • The records will have to be updated monthly and new employees added to the system as they join. Records will have to be available to be reviewed by the Inspectors from the Pensions Regulator when they visit.
  • For those employers who do not wish to establish a 'QWPS' there is a new Government established scheme, NEST (National Employment Savings Trust) which will be available for companies. NEST is specifically aimed at those companies with large numbers of workers, a high turnover and low average wage. The range of facilities is limited but it will be suitable for some employers.
Workplace Pensions

What can employers start to do NOW to make sure that they are not penalised in the future?

Crucially, employers must ensure that records regarding pension schemes are actually kept, that they are up to date and that the right systems are in place to re-enrol all the opted-out employees.

How can Mitchell Charlesworth help your business or clients?

  • Many employers will need help to work out the true costs and implications of the Workplace Pension Reforms for their business. Mitchell Charlesworth will provide an initial report (following consultation with the employer) which will identify all the eligible, non-eligible and qualifying jobholders. Once we have done this, we can identify qualifying earnings and calculate your company's liability under the new regime.
  • Many employers will actually need to establish a QWPS for the first time. Mitchell Charlesworth can help you establish a scheme (if none exists) or ensure that an existing scheme can be modified to become a QWPS.
Pensions and Investments Team
  • Once you have established a workplace pension scheme, we will then help you to establish the administration and record-keeping of the scheme to make sure that you continue to comply with the legislation and report correctly to the Pensions Regulator as required under the new rule

How will the Pension Reforms affect my employees?

The new auto-enrolment requirements will not just affect you the employer but also your employees. From your companies duty date, employees will also have to contribute to their pension fund. This will eventually be at a level of 4% Net of the same salary band.

Should your employees wish, they will be able to opt-out of the pension membership. However, employers must re-enrol all employees who opted-out of the scheme every three years.

Spend or Save?

What are the penalties for those employers that fail to comply?

Magnifying Glass The Pensions Regulator (who will enforce compliance with the legislation) will police these reforms by employing teams of inspectors who will visit employers to ensure that employees are being correctly auto-enrolled into Qualifying Workplace Pension schemes (QWPS). These inspectors will also check that those employees who choose to 'opt-out' have not been induced or encouraged by the employers into doing so.

Large fines will be imposed on employers who do not comply with this new legislation. It is important to note that there will be no exemptions for small businesses and the reforms must be applied, even if you employ just one person.

Where can I get more information about the Pension Reforms?

Mitchell Charlesworth will be releasing more detailed information about the Workplace Pension Reforms as each deadline approaches.

Now is the time, however, to start planning and budgeting for the changes to ensure that your additional expenditure can be correctly built into your employees' remuneration packages.

If you have any questions about Workplace Pensions Reform and how auto-enrolment will affect your business, please contact our Pensions and Investments department today on tel: 0151 255 2300 or complete a quick enquiry form and we will get back to you with a solution.

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