We’ve all seen the adverts on television with Theo Paphitis, Nick Hewer and Karren Brady telling us that “they’re in”. Whilst these adverts are certainly memorable, which is after all their intention; they tell employers nothing about how to meet your Automatic Enrolment obligations.
In-fact, a number of myths and misconceptions have built up over the past few months, which are not helpful to employers.
So we thought we’d lay a few to rest, here are nine, along with the truth, we hope it will help you understand Automatic Enrolment a little better.
Myth #1: “All my employees will have to join”
This is one of the problems with Automatic Enrolment; millions of workers, particularly women, the low paid or part-timers won’t actually benefit.
Only employees aged between 22 and the State Retirement Age, who earn more than the equivalent of £10,000 each year, need to be Automatically Enrolled; these people are known as Eligible Jobholders.
There are two other categories of worker, Non-Eligible Jobholder and Entitled Worker, neither of whom have to join the pension, although they can if they wish.
As an employer you will need to assess your workforce just before your Staging Date to see which of your staff fit into each category. You will then have to repeat the exercise each pay period, which for most businesses means doing so either weekly or monthly.
Myth #2: “Contributions are based on my employee’s full salary”
Unless you select an alternative option, contributions are based on the band of earnings between £5,772 and £41,865 per year.
This is another problem with Automatic Enrolment; the contributions are not based on all of a members earnings, potentially reducing the pension they get in retirement, compared to the salary they received whilst they were in work.
Myth #3: “Postponement gives me an extra three months to comply”
No it doesn’t.
If you elect to postpone, all it does it push back, by three months, the date on which your first contribution needs to be made. You still need to have completed all the tasks to successfully comply by your Staging Date.
What’s more, if a member of your staff asks to join during the period of postponement, then you must allow them to and make contributions on their behalf.
Myth #4: “I’m a small business; I’ll get away with not doing it”
You can try it, but you won’t succeed.
The Pensions Regulator can tell pretty easily which businesses have hit their Staging Date and which haven’t.
For businesses not complying warning notices, fixed penalties plus daily fines will follow.
If you don’t believe us, try it and find out for yourself!
Myth #5: “I’ll get all my employees to opt out”
It is the right of your employees, at least those who qualify, to be automatically enrolled into a pension.
Encouraging or helping your employees to opt out is against the Pensions Regulator rules and if proven will lead to a large fine.
To put it simply, don’t do it!
Myth #6: “It’s easy, it won’t take me long to sort”
Complying with the rules takes time, take our word for it, we’ve helped enough businesses meet their Staging Date to know.
The Pensions Regulator encourages all businesses to leave 12 months to complete all the tasks involved.
This would certainly be the case in an ideal world, although we know businesses have other priorities, we would therefore recommend leaving a minimum of six months.
Myth #7: “We already run a workplace pension, we’ll just use that”
Two points here.
Firstly, if you already have a workplace pension it is unlikely all of your staff will be members. We’ve seen cases where a business has approached their existing pension provider, asked them to accept the new members, only to be turned down.
Secondly, for a scheme to be used for Automatic Enrolment it must meet certain criteria, especially in relation to charges. Do you know if your existing scheme complies?
Don’t take it for granted that you will simply be able to use your existing pension.
Myth #8: “We hit our Staging Date, that’s all we need to do”
If only it were that simple!
You will still need to:
- Deal with people who opt-out and arrange a refund of contributions
- Every three years re-enrol everyone who has opted-out
- Deal with new joiners and leavers
- Reassess your workforce each pay period to look for employees who need to move categories
- Accurately calculate contributions
- Deduct contributions from your employee’s wages and pay them to your pension provider
That’s not an exhaustive list, but it gives you an idea of the on-going work involved with Automatic Enrolment and the burden it will place on your business.
Myth #9: “I want some help but it’s so expensive”
As an employer dealing with Automatic Enrolment you have two choices:
- DIY, which will cost you time, but you won’t be paying an adviser
- Bring in an adviser, this will save you time, but you will naturally pay fees
An adviser doesn’t have to cost the earth, in fact you will find many are surprisingly affordable. You will also have the bonus of handing over the responsibility of the project to an experienced adviser, who has done this before for other clients, leaving you to get on with running your business.
We’ve developed a four stage process to help you meet your obligations.
We’re flexible, so employers can pick and choose which stages they want to work with us on, completing some themselves if they wish.
Our team of specialists are here to help and we’d love to help you with your Automatic Enrolment project, call us today on 0115 933 8433 or email firstname.lastname@example.org