Auto enrolment is here but many accountants and small businesses aren’t ready for the pension changes coming down the line, Charles Counsell, Executive Director at the Pensions Regulator told more than 1,300 Xerocon London attendees today.
He explained the combination of longer lifespans and falling retirement savings has created a case for compulsory pension savings in the UK.
“We should be making provisions for ourselves for retirement, but we haven’t been. Auto enrolment is about reversing that… We need to give people a nudge to start saving for their retirement,” he said.
Despite the name, for small business owners, there isn’t much that is automatic when it comes to setting up your operations to handle auto enrolment.
Counsell said the Pensions Regulator has been helping employees get ready for their staging date, but research released at Xerocon London 2016 by the Pensions Regulator showed around two-thirds of UK small businesses will contact an advisor for help.
So far around 5.8 million workers have been automatically enrolled and around 79,000 employers have notified the Regulator they are now compliant.
Counsell had five steps small business owners need to follow to become compliant ahead of auto enrolment and avoid steep penalties.
1. Confirm who to contact
Make sure you let the Pensions Regulator know who will be handling your auto enrolment process.
The regulator will be in contact with that nominated person to let them know when your staging date is approaching and keep them up-to-date with what steps need to be done and when.
2. Find a pension scheme
Small business owners should figure out which scheme they’d like to use about six months before their auto enrolment start date.
“The reality is about 60% of small businesses are doing it between two and six months before their start date,” Counsell said.
3. Work out who needs to be added to a pension scheme
Small business owners need to figure out which employees need to be added to their pension scheme. The criteria is largely based on the level of monthly gross income.
“We advise employers to use your payroll software to do that and integrate this with your payroll processes,” Counsell said.
Xero has built (and is building more) features inside Payroll that will automate and streamline the work associated with auto enrolment and workplace pensions.
From assessing which employees should be auto enrolled, to distributing the information to the various pension funds – our vision is to automate the entire process, save partners’ time, lower risks and enable them to grow their business.
4. Write to your staff
Communication really is key in this process. About six weeks before your staging date, write to your employees so they know what’s going on and what to expect once they’re enrolled.
5. Declare your compliance
Once you’ve chosen a scheme, enrolled employees in a pension scheme and let them know what’s happening. You need to declare that you’re compliant to the Pensions Regulator.
But your auto enrolment responsibilities don’t cease after your staging date. Small business owners and their advisors need to continuously use the payroll process to assess staff, deduct and pay contributions, and keep records.