Why charities and not-for-profit’s need to think differently about auto enrolment

Charities, just like any other UK business, are legally obliged to automatically enrol their eligible workers into a workplace pension. Exactly the same rules apply. But, charities and not-for-profits may face very different challenges to other organisations and for some, the administrative burden and costs of auto enrolment could prove a struggle.

To keep costs down and to ensure you’re keeping the administrative burden of auto enrolment to a minimum, it’s important you choose the right workplace pension scheme. If you already have a workplace pension scheme provider, you should check that they meet the current auto enrolment rules – not all do. You may decide you want to find a new scheme – make sure you give yourself ample time to research and prepare.

Some things to look out for:

Will the scheme accept my staff?

Some workplace pension providers will not take on smaller charities. It is therefore important that you factor in time to shop around and find a scheme that will accept you.  NOW: Pensions is happy to take on small employers.

How much will it cost?

It’s important to find out what the costs are for signing up with a workplace pension provider and what administrative features they offer so that you can weigh up costs and charges against the level of services offered. Remember, some workplace pension providers may not provide any guidance or assistance and others may do all of this, plus communicate to your staff and keep your staff records for you, such as NOW: Pensions. Some services may make automatic enrolment easier for you over the long term.

Does the workplace pension scheme apply appropriate tax relief arrangements?

Different schemes apply different tax relief arrangements, called relief at source, or net pay. If you have employees that don’t pay income tax then they can still get tax relief from the government if the scheme uses ‘relief at source’ but can’t access this in a net pay scheme. NOW: Pensions operate a net pay arrangement but feel strongly about those who are being disadvantaged by this anomaly and so we are topping up this shortfall for the 2016/17 tax year*. We are the only net pay scheme offering this.

Is the pension scheme ethical?

It’s important to find out the terms of the pension into which you will be auto enrolling staff; the fund’s potential returns; and how the scheme is financially rated. However, where the investments are made will also be a major factor for charities. Auto enrolment scheme providers have a ‘default investment arrangement’. This means that they choose the investments rather than your employees (although employees can make a choice later). As a charity you will probably want to know where the investments are being made to ensure that none are in “sin stock”, i.e. tobacco, arms, or anything that can be construed as unethical.

In October 2017, NOW: Pensions introduced £65 million of green bonds into the NOW: Pensions Diversified Growth Fund. The fund now has approximately 13% of total assets under management invested in green bonds.  Green bonds provide essential capital for projects involved with environmental and climate protection which benefits NOW: Pensions members as well as society as a whole.

Is the scheme compatible with my payroll?

Check that the pensions scheme you choose is compatible with your payroll system. If it isn’t you may choose to change your payroll system or find a different provider.

Finally, once you have decided on a pension scheme, make sure you are fully aware of your obligations. Completing a declaration of compliance is one of a number of tasks to do as part of your automatic enrolment duties. Failure to complete and submit to The Pensions Regulator could result in a fine. One of the reasons given by employers for missing their declaration of compliance deadline is that they thought somebody else was completing this on their behalf.

* It’s important to note that the deadline for members submitting a claim is midnight on 30th April 2018 in order to receive the top up.

Sources:

http://webarchive.nationalarchives.gov.uk/+/http://www.charitycommission.gov.uk/detailed-guidance/money-and-accounts/defined-benefit-pension-schemes-questions-and-answers

http://www.cfg.org.uk/resources/Publications/~/media/Files/Resources/CFDG%20Publications/smlcharitiesautoenrolment.pdf

https://www.theguardian.com/voluntary-sector-network/2016/may/16/how-to-plan-for-your-charitys-pension-auto-enrolment

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