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Recent years have witnessed the introduction of ‘Real Time Information’ (RTI) whereby businesses are required to advise HMRC every time they pay one of their employees.

This has put a financial strain on many small businesses due to the additional administrative costs and this will continue with the introduction of ‘workplace pensions’.

With an ever ageing population and the maximum weekly basic state pension for a single person being less than £120, it is even more important for individuals to provide for their retirement.

This new legislation means that every employer has to legally automatically enrol their staff into a workplace pension and make contributions. The legislation applies to the following employees:

  • Employees aged between 22 and state pension age
  • Employees with earnings more than £10,000 per annum
  • Employees who work in the UK

As an employer you need to make your staff aware of the scheme and enable other employees to join should they choose to do so.

Not only does an employer have to offer the scheme to staff, but they will be required to make pension contributions on their behalf.

For auto enrolment, to ensure you as an employer, comply with the legislation, there are set minimum contributions you are required to pay. Please see below for details of the level of contributions required:

DateEmployer Minimum ContributionTotal Minimum Contribution
Before 30/09/20171%2%
01/10/2017 to 30/09/20182%5%
01/10/2018 onwards3%8%

The above rates represent a percentage of gross earnings.

Employees are able to opt of the scheme but you are not permitted to encourage this in anyway. Regardless if you have any active employees contributing to the scheme, you are still required to make this available.

The next step…….

Each individual employer is allocated a staging date. This date is based upon the total number of people in your individual PAYE scheme. This date can be found by entering your PAYE reference on the Pension Regulator website, at:

www.thepensionsregulator.gov.uk/employers/

For most small employers the date may seem a distance in the future. However, it has been widely documented that setting the scheme up can take a significant amount of time and it is suggested that planning starts at least 12 months before your ‘staging date’. You are required to make contributions from your ‘staging date’ and therefore the scheme needs to be up and running by that date.

There are a significant number of pension scheme providers including a scheme set up by the Government – the ‘National Employment Savings Trust’ (NEST). As this was set up on behalf of the Government it will accept all employers into the scheme.

In addition to ensuring you have appointed a Pension Scheme provider you will also need to ensure that your current payroll software package is compliant and your employee records are all up to date.

This adds to the ever increasing burden put on the employer, and if you would like any further information on the above please contact the team at Spirare.