A big change is already in motion for employers as the Government implements its plan to have as many people in a qualifying workplace pension as possible. With deadlines fast approaching it pays to have the details of your scheme in place otherwise you could face severe penalties.
A Staggered Roll out
Since October 2012, larger companies have been gradually implementing an auto enrolment pension mechanism into their day to day operations. All firms that employed from 90 employees in April 2012 should have implemented auto enrolment by May 2014.
Now the time has come for small and medium sized providers to start to have auto enrolment policies in place and over the next four years. Despite considerable attempts to raise awareness there is still a considerable gap in the understanding of firms about what they have to do.
About Auto Enrolment
The first misconception is that implementing these schemes will be easy with only a little extra work involved. The truth is that it could be quite complicated and will involve communication with the Pensions Regulator together with considerable administration. Existing payroll systems will need to be adjusted to accommodate these changes.
The good news is that there may be – or at least should be, plenty of time. The Pensions Regulator will write to you well in advance of your staging date – or in other words – the point at which you need auto enrolment to be business as usual. This should give you plenty of time, but a number of surveys show that many firms are not prepared.
Not Being Ready Auto Enrolment Penalties
The Pension Regulator is serious about these changes. Firms that fail to comply can receive a fixed penalty, but that’s just the tip of the iceberg. Depending on the number of employees affected by the failure to comply, they can impose escalating daily penalties up to £10,000. For a relatively small company those penalties could devastate cash flow.
The option to postpone assessment of any employee means many companies think they have 3 extra months to get everything in place (Subject to certain conditions), but this approach merely pushes the problem down the line and the penalties can be quite severe.
Simply assuming your current pension provider will take up the slack and has left some firms let down at the last minute. The task is made all the more challenging because many providers are refusing to quote for small business operations.
Worse still, as time runs short for these firms, many are still not putting provisions in place. NOW: Pensions found that 44% of the firms they had surveyed had not given any thought to finding a pensions scheme that could comply with the new regulations.
This, together with the possibility of severe penalties is storing up a major headache for small business owners and a potential windfall for the Government in fines.
You can read more about some of the potential costs of postponing Auto Enrolment from our previous blog The True Cost of Auto Enrolment Postponement by clicking here.