If you’re a small business owner, it’s likely that you’re pretty busy. Running a business can be stressful, inspiring and energising in equal measure. For that reason, hearing that you’ve got to set up a workplace pension and put your staff into it via auto enrolment could provoke one simple reaction: “How do I get out of this?”
The short answer is that you can’t. Auto enrolment is the law and there’s no getting around it. But, while it can be complex, it’s up to you how difficult it becomes.
So, how does auto enrolment work?
Companies across the UK are putting staff into workplace pension schemes through a process called auto enrolment. It’s up to staff to decide whether they want to stay in or opt out – and so far, most have decided to stay in. Every company will have a staging date, which is the date where the employer must comply with the auto enrolment legislation.
Employers contribute a percentage of an employee’s salary, and so can the employee, but not every employee is eligible for auto enrolment. It’s for UK workers between the ages of 22 and the state pension age, who are earning more than £10,000.
By 1 February 2018 every company in the UK will have completed auto enrolment.
If you’re after more information and want to know How to best get started with auto enrolment, look no further.
Sounds complicated. Are there any ways to cut down the admin?
Yes, there are plenty, and it will require some work on your part. But the sooner you begin thinking about it, the easier it will be.
Auto enrolment works best when it’s built on strong foundations. Sloppy groundwork will result in a lot of ongoing maintenance! No matter if you decide to enlist the help of a professional, whether that’s a financial adviser, your accountant, or a pensions professional – the auto enrolment responsibility is like a boomerang that will always come back to you.
Instead of setting up a scheme yourself, you could delegate to what’s called a master trust, which looks after lots of companies’ pension schemes under one roof (we’re one of those). There will be some initial work to get things set up, but a master trust would handle much of the ongoing work – things like deciding investment strategy, handling member contributions and making sure savers’ money is well looked after.
That leaves you to get on with running your business.
We have thought of the Top 5 tips to make auto enrolment as hassle free as possible. Make sure to have a read to insure the smoothest auto enrolment journey for your company.
How did auto enrolment come about?
Auto enrolment came about through a perfect storm of societal and economic factors.
First off, people are living for longer. Back when the state pension was introduced in 1908, it was really only intended to support people for a few years before they died. Indeed, most people died before they had the chance to claim the state pension; in 1908, the average life expectancy was around 50.
These days, many people can expect to live well into their eighties. The government can’t afford to fund peoples’ retirements for 20 years or more, so the emphasis is gradually shifting onto private pensions that people can build up in the workplace.
Second, the previous workplace pension schemes that were being offered to people became too expensive for employers to operate. Defined benefit schemes typically allowed people to retire on the final salary they were earning, or took an average of the money people had earned through their career and paid that to them in retirement.
Clearly though, employees still need pensions to fund their retirements. So a new type of pension scheme was needed. That’s where auto enrolment came in.
Our auto enrolmment recommendation quiz could provide you with some useful tips and helpful information.