Auto-enrolment may be just another thing on your long to-do list, but the key is to prepare in advance.
Douglas Adams, best known as the author of The Hitchhiker's Guide to the Galaxy, once declared, “I love deadlines. I love the whooshing noise they make as they go by.”
It’s a remark that epitomised his irreverent sense of wit (although it would have no doubt appalled his publishers). In fact, he had such difficulty keeping to deadlines that on one occasion he was locked in a hotel room with his editor for three weeks to ensure that So Long, and Thanks for All the Fish was completed.1
Like Adams, we all struggle occasionally with the inclination to postpone a difficult job. Yet treating a deadline with the same indifference isn’t an option if you’re running a business. Deadlines are part and parcel of daily life for owners and directors, whether it’s delivering a product to a customer, running payroll, or filing a personal tax return.
Business owners are also expected to be up-to-date on legal and regulation changes, such as those related to workplace pensions. Under the Pensions Act 2008, every employer in the UK must put certain staff into a pension scheme and contribute towards it – a process known as ‘auto-enrolment’. While it sounds like the sort of jargon that could be lifted from the pages of The Hitchhiker’s Guide, auto-enrolment is very real and comes with a deadline attached.
The deadline by which your company must comply with auto-enrolment is known as its ‘staging date’. The staging date for a company in existence on or before 1 April 2012 is determined by the size of its PAYE scheme. Newer employers are allocated a date based on when they first started paying PAYE income. For example, employers paying PAYE income for the first time between 1 April 2015 and 31 December 2015 will stage on 1 October 2017.
If you have not yet done so, the first step is to find out when your staging date is and put plans in place to meet the requirements set out by the Pensions Regulator. You can find your staging date on its website if you’re unsure.
“The thing to remember is that if you employ anyone who meets the eligibility criteria, the onus is on you to put them into a suitable scheme,” says Ian Price, divisional director at St. James’s Place. “They can choose to opt out of the scheme, but not before you have put them in it, even if they’ve told you that’s what they want. Furthermore, any employees who don't qualify should be informed so they can decide if they wish to opt in,” he adds.
As with anything that represents a cost to a business, the temptation can be to put auto-enrolment off to the last minute. However, you shouldn’t allow a mindset to develop where you think your company’s staging date is flexible or non-enforceable. The regulator is checking more frequently that responsibilities are met, and is cracking down on firms that ignore their duties.
Every few months it reports on instances when it had to use its powers. The latest report states that between April and June of this year, it had to use its powers 16,436 times, which included the issuing of 1,384 escalating penalty notices of between £50 and £10,000 per day (depending on size) to companies that failed to comply with a statutory notice.2
Furthermore, it decided that one firm’s failure to comply was so serious that it merited the criminal prosecution of both the partner and his firm – the first time it has taken such action.
Price says that while the vast majority of businesses are doing the right thing, “The regulator has shown that it is not afraid to use its teeth when there is non-cooperation.”
Crucially, businesses which start up from October this year will be required to put pension plans in place as soon as they take on a member of staff. “Young businesses tend to be run by individuals with limited time and resources, so it makes sense for them speak to a specialist who can provide them with the advice they need,” says Price.
If your business has already reached its staging date, but you have not established a qualifying pension scheme for your eligible employees, the quicker you get in touch with the Pensions Regulator, the better positioned you will be to avoid a fine. In the words of The Hitchhiker's Guide: “DON’T PANIC!” but swift action will be required.
The value of a pension with St. James's Place will be directly linked to the performance of the funds selected and the value can therefore go down as well as up. You may get back less than you invested.
1 Hitchhiker: A Biography of Douglas Adams, Simpson, M. J. (2003).
2 The Pensions Regulator, Compliance and enforcement Quarterly bulletin: April-June 2017.