Michael Lansdell from Lansdell & Rose Chartered Accountants talks to employers this month about auto-enrolment.
Auto-enrolment into workplace pensions is a highly topical subject right now for all doctors and dentists with employees. New legislation came into action from mid June 2015, as the government’s flagship scheme to encourage the nation to save for retirement moves into the next phase.
Even if you have just one employee the law applies. Act now.
The views expressed in this article are specifically those of Lansdell & Rose Accountants.
Simply not enough £’s in the retirement pot
Auto-enrolment, also known as “company pension” or “work pension” is a Government initiative that has been in place since 2012 to aid retirement planning across the nation.
The simple fact of the matter is that millions of people are not saving enough funds to see them through retirement. Given that the life expectancy age is increasing whilst simultaneously contributions are decreasing, all in all, more funds are required.
This double edged sword means that the Government needed to intervene with a scheme to enforce contribution, which is being rolled out over a six year period, which started from October 2012.
Employers need to act
It is called “auto-enrolment” as employees need not do anything to be enrolled, however employers do have to take action.
Your responsibility as an employer includes:
- Choosing a pension scheme
- Notifying all employees
- Making sure all your eligible employees are enrolled onto a workplace pension scheme
- Contributing to the pension
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Auto enrolment timescales
As this scheme is being rolled out over six years, starting in October 2012, when you will need to take action depends on a number of variables, mainly the number of employees. Many larger employers are already in full swing with auto-enrolment. Here are the broad rules:
- Over 250 employees – October 2012 – February 2014
- 50-249 employees – April 2014 – April 2015
- 1-49 employees – June 2015 – April 2017
- New employers (who established their business after April 2012) – May 2017 – February 2018
The vast majority of UK dental practices and medical businesses will have between 1 and 49 employees hence why this is a topical subject right now for healthcare professionals.
To find out your exact date, called your “staging date” you can use an online tool provided by the Pensions Regulator. You need your PAYE reference to hand:
Further help is available for employers through The Pensions Regulator website and www.gov.uk.
Can I defer auto-enrolment for my business?
The date for your business to start auto-enrolment was enforced by law since April 2012. However, once the Pensions Regulator has issued you with a date to start enrolling your employees you have an optional three month window for deferment. Employees need to be notified in writing if you choose this route.
Who is eligible for auto-enrolment
Auto-enrolment is a simple way for employees to save for their retirement whilst they are earning. It is not mandatory for them to remain part of the scheme, however, if they meet the terms below, it is mandatory for you as an employer to enrol them:
- They are now already in a qualifying pension scheme
- They are aged 22+
- They are below State Pension age
- They earn more than £10,000 a year (this figure is reviewed every year) AND
- They work, or usually work in the UK
How much will the contribution cost my business?
The minimum contribution at the moment is 2% of an employee’s salary over £5,772 and up to £41,865. These figures are likely to change as the scheme evolves.
The minimum % is also due to increase to 5% as a minimum from October 2017 and then 8% from October 2018.
The “contribution” relates to a total by the employer and the employee plus the tax relief issued by the Government. The “minimum” is exactly that, the basic contribution required.
Many employers will agree to invest more for their employees as a work-based incentive.
Seek advice if you are unsure
As with everything financial, seek professional advice if you are unsure. Other factors do come into play such as maternity, sick leave, part time workers, temporary and short term contract workers.
Dental & Medical Financial Services work alongside many other healthcare specialists to give you access to the best advice. Please call our team today to get connected.
Tel: 01403 780 770