Calling all business owners, how will Automatic Enrolment affect you? Your quick guide

Automatic Enrolment

Calling all business owners, how will Automatic Enrolment affect you? Your quick guideAutomatic Enrolment is coming soon. If you run your own business, whether you’re a small, medium or large business, you will be affected and you need to take action. If you don’t you could be subject to a fine, of up to £10,000 per day!

So what’s it all about? What will you have to do to comply with the new regulations? Most importantly, how much will it cost you to comply and how long will it take?

We’ve put together this quick guide to help you understand your obligations; of course after reading this you’ll have other questions and we’d love to answer them for you. Simply pick up the phone and call us on 0115 933 8433 or email and our team of Automatic Enrolment experts will help you.

Back to the guide…

Do you run a business and have a question about Automatic Enrolment?

SIPP Advice

Contact our team of specialists today:

0115 933 8433

Online enquiry form

Why is Automatic Enrolment being introduced?

There are some simple facts which mean we all need to put more aside to pay for our retirement:

  • We are all living longer
  • 7 million people are not saving enough for their retirement
  • Only 1 in 3 employees in the private sector have a pension

The current system cannot continue, the Government is therefore bringing in Automatic Enrolment to increase the number of people making provision for their retirement. This of course means employers will have to help their employees.

What will employers have to do?

To comply with the regulations employers will have a range of obligations to meet, including:

  • Enrol their eligible employees into a suitable pension by a set date, known as their staging date
  • The staging date for each employer is dependent on the size of their payroll, with larger businesses having to comply with the regulations before smaller firms do. If you don’t know your staging date this is the first piece of information you need, contact us and we can tell you when it is
  • Segment your employees into  different categories as not all employees, especially the young or low paid, will have to be automatically enrolled
  • Make contributions on behalf of your employees, starting at a minimum of 1%, rising to 3% by 2018
  • Communicate with employees
  • Deal with employees who opt out of the scheme and re-enrol these people every three years
  • Deal with new joiners and leavers
  • Complete the registration process with the Pension Regulator
  • Keep adequate records

What are the penalties if we don’t comply with the new rules?

Any employer not meeting their staging date could be subject to very heavy penalties, which come in three stages:

  • Stage 1: Initial warning
  • Stage 2: Fixed penalty of £400
  • Stage 3: Escalating penalty, 1 – 4 employees £50 per day, 5 – 49 employees £500 per day, 50 – 249 employees £2,500 per day, rising to £10,000 per day for companies employing more than 500 employees

Which employees need to be automatically enrolled?

Not all of your workforce will need to be automatically enrolled. It is your duty as an employee to assess whether an employee needs to be enrolled or not.

Briefly the following people will need to be enrolled:

  • Employees who are at least 22 and have not yet reached the State Retirement Age
  • Employees who earn more than £9,440 per year

The definition of employees isn’t as straightforward as it might seem and could include contractors or people who, on the face of it, appear to be self-employed.

You’ll also have to offer membership, but not automatically enrol, younger employees and those earning less than £9,440.

How much will you have to pay in?

The level of contributions needed increase over the next few years:

  • From your staging date to October 2017: Minimum 2% contribution of which at least of 1% must come from the employer
  • October 2017 to October 2018: Minimum 5% contribution of which at least 2% must come from the employer
  • October 2018 onwards: Minimum 8% contribution of which at least 3% must come from the employer

Can workers opt out?

Yes, but you as their employer cannot encourage employees to opt out or even handle the paperwork on their behalf.

Any employee who opts out has to be re-enrolled by their employer every three years, of course then can then opt out again.

How much time will it take to comply?

Clearly every business is different, but research done by the Centre for Economic Business Research (CEBR), suggests that if employers do not outsource the work to a third party it will take:

  • Up to 103 working days to initially comply with the regulations, plus;
  • Up to 3 ½ days per month to maintain compliance

The Pensions Regulator suggests that firms should allow 18 months to plan and implement their strategy.

One option is for employers to outsource the work involved to experts, such as Investment Sense, who can remove the burden and ensure compliance.

“We already run a pension for our workers, is this enough?”

Possibly, although the pension must meet certain rules, particularly relating to charges and employee access.

Some employers, who run an existing pension scheme for their staff, will need to put another in place to ensure compliance.

How can Investment Sense help?

We know many employers are concerned about their Automatic Enrolment obligations and we’re here to help.

We’ve developed a four stage process to ensure your business is compliant by your staging date and sticks to the rules in the months and years to come.

If you:

  • Would like to know your staging date
  • Have a question about Automatic Enrolment
  • Would like to know how you can comply with the new rules

Then get in touch today, to put it bluntly, this problem isn’t going away and your staging date is only getting closer.

We’re here to help, call us on 0115 933 8433 or email