Avoiding auto enrolment complacency and ignorance
If you are a company that pays your employees via PAYE and aren't solely employing directors then auto enrolment affects you.
You can't dodge it, you can't hide from it, you won't be exempt from it and you will have to comply with it, it is really that simple. Sticking your head in the sand and waiting for this all to blow over is not the solution because you could find yourself slapped with a £400 fine for non compliance... Oh, and a daily fine of up to £10,000 for continued non-compliance.
So you really need to ask yourself: "Can I afford those kinds of fines?"
Auto enrolment legislation was introduced by the government in 2012 to ensure that as a society we had enough money to support ourselves during retirement. They even made the large corporations stage first to iron out the creases and (hopefully) see an example set for the rest of the businesses in the UK. And it was a big success, too.
Now, over 5 million people have been auto enrolled into a qualifying pension scheme, with an opt-out rate of only 12% which is pretty impressive. This means that at least 5 million people are now saving more adequately for their retirements which is a great success for the government and the employees.
The contributions themselves are a lot less for you to pay than the fines in the first place.
Imagine a normal limited company with 10 employees. Each employee earns £18,000 salary, are all over the age of 22, under state pension age and are due to be auto enrolled into the company's qualifying pension scheme.
Contributions are currently set at 1% until 30th September 2017, 2% until 30th September 2018 and then 3% from 1st October 2018 onwards. This means that the contributions per month, per employee will be £180. So, paying £1,800 per month towards your employees' futures is a lot more constructive than paying (for a business with 10 employees) a £400 fixed penalty and a daily fine of £500 (find out the full table of fines here).
As with many businesses, the initial realisation of auto enrolment and the new responsibilities that were upon them inferred terror. This large piece of legislation; one of the biggest shake-ups in pensions history; lead a lot of people to panic. This is understandable but it is not impossible. Because of the large businesses already having staged, there is a mountain of information available to those smaller businesses that are now approaching their staging dates.
It is important that you do not become complacent, either. Auto enrolment is definitely not something that can just be put into place the night before. The Pensions Regulator (TPR) are suggesting that you start preparing for auto enrolment at least 12 months before you are due to stage to allow yourself plenty of time.
Finding out your staging date is the very first procedure you should undertake. TPR have sent out letters to all businesses across the UK with their staging date on them and what steps to take next. If you didn't receive one of these letters then do not worry, all you need is your PAYE reference and a visit to TPR's website to start you off.
There are even facilities on there to enable you to create an action plan, check the criteria for auto enrolment eligibility and to start and submit your Declaration of Compliance which we will come onto next.
The Declaration of Compliance is the most important part (apart from the auto enrolment itself) of the whole process. It is your chance to raise your voice and let the government know that you are fully compliant with their new legislation and that they can't touch you with any fines.
TPR stated that of the 166 fixed penalty notices that were issued, the majority were due to the Declaration of Compliance being submitted late, incorrectly or not at all. You can start your Declaration of Compliance early and fill it in as you go along. You could even use it as a checklist to help you through the process.
The emphasis on the capacity crunch is also increasing. With around 46,300 businesses set to stage this year alone, and this number rising exponentially for the next couple of years, the amount of availability of pension providers, and advisors is rapidly decreasing. Not every pension provider will support you for auto enrolment so make sure you check early and make provisions.
This is also a great time for you to review your current payroll process and find out any ways that you can streamline it.
The IRIS AE Suite™ automatically assesses your employees' eligibility for auto enrolment, enrols them into a pension scheme (through generation of the pensions output file), distributes pension communications letters electronically (another legal requirement) and also publishes your employees' payslips and P60s electronically for easy access by your employees.
The IRIS AE Suite™ is a great way for you to stay on track with the legislation and massively reduce the burden that it has on you and your business. Sandra Crawford of Silverstone Circuits was also in the same position as you and explains her initial thoughts and feelings of auto enrolment in the short clip below.