Compliance cut-off approaches for automatic workplace pension enrolment
In 2016, over half a million companies will need to have their automatic enrollment workplace pension schemes in place.
This means employers will need to automatically enroll any employee who:
- Is between age 22 and State Pension age
- Earns more than £10,000 per year
- Works in the UK
As a result, many businesses have already felt the pressure to start thinking about how to create their pension schemes in 2015. To avoid a crush at the back end of 2015, we suggest businesses prioritise the planning sooner rather than later this year.
Automatic enrolment success
In recent months, much has been made of the success of automatic enrolment (AE). Despite this, so far, only 3% of the UK’s businesses have taken strides to establish their AE schemes, so there is a long way to go before we should start celebrating in full.
Heads of companies, financial leaders and accountants should be putting pressure on their businesses to start placing AE higher up on the agenda. When January 2016 comes around, UK financial planners are likely to be rushed off their feet dealing with last-minute company end-of-year servicing.
Of course, companies should already be incentivised to want to meet the deadline from a moral perspective, but the government is giving businesses that refuse to conform a £400 penalty. This isn’t going to break the bank of any business, but it’s money better in the bank than not. Penalties then escalate:
- Pension regulators can provide businesses with fixed penalty notices for failure to comply with statutory notice, and these can be proscribed at a daily rate of between £50 and £10,000, depending on the size of the organisation.
- Where employers fail to provide contributions where due, penalties of up to £5,000 for individuals, and £50,000 for organisations are provided.
- Where employers breach compliance, a prohibited recruitment conduct policy notice can be offered at a prescribed rate of between £1,000 and £5,000 depending on the number of staff the employer has.
To avoid all of these fines, our expert financial advisers suggest that all businesses arrange their automatic workplace pension promptly.
Prosperity for employee and employer
Ultimately, we think that automatic workplace pension enrolment is a fantastic idea, but it means that businesses need to put in the hours to deliver their schemes. If they are successful, however, they will provide an excellent service to their employees, and avoid the punishing fines mentioned above.
For advice on how to establish your workplace pension, contact our knowledgeable financial advisers today.
This article is for information only and must not be considered as financial advice. We always recommend that you seek independent financial advice before making any financial decisions. Investments can go down as well as up and you may get back less than you invested.