Ostriches don’t bury their heads in the sand; they wouldn’t be able to breathe! But they do dig holes in the dirt to use as nests for their eggs. Several times a day, a bird puts her head in the hole and turns the eggs. So it really does look like the birds are burying their heads in the sand.
Instead of this implying that these giant birds are hiding from a threat, they are actually nurturing their future offspring.
This month saw the introduction of a new law on workplace pensions. Keeping abreast of new Laws isn’t necessarily at the top of every employer’s to-do list; however, ignoring this could lead to serious consequences.
On 1st June 2015 new regulations were introduced to the UK regarding workplace pensions, with wide coverage in the press, on TV and radio and just about everywhere on social media. Every employer with at least one member of staff now has new duties, including enrolling those who are eligible into a workplace pension scheme and contributing towards it. This is called ‘automatic enrolment’ because it is automatic for staff.
The first thing you need to know now is your businesses staging date. Your staging date is the date the automatic enrolment duties come into effect.
Automatic enrolment has a name that suggests that we can sit back and wait for something to happen automatically. Far from it! For UK employers there is a lot of planning to do for the benefit of their employees and, I suppose, the country as a whole. It will lead to more people having a private pension as their income, when they retire.
We all know that there is a problem, because we are all living longer and there simply isn’t enough long term money in the UK savings pot to pay for everyone to have a decent pension. The present solution is auto-enrolment and the buck now stops with any business that has employees.
Whatever your views, this is here right now and it will need your immediate attention!
Any legal requirements that are ignored will have consequences, and my advice to all of you, is to seek professional help to know exactly what you have to do – now. Leaving this until it’s too late will have very serious penalties. Some accountants may be willing to support their clients through this process, which is fine as long as they have the knowledge and skills to do so.
We simply cannot afford to get this wrong. It is my belief that if you need help with a specific issue, you seek the best possible support. You wouldn’t visit your local family doctor if you needed surgery, would you?
Action must start 12 months before the staging date. This is the date when the automatic part kicks in. This date is when your staff will be automatically enrolled; however, nothing is ever that straightforward and prior to this you must prepare your business by knowing when your crucial deadlines are. You must provide a point of contact, create an outline plan, identify who to enrol, choose your software, check records and finally choose a pension scheme.
All of this must be done BEFORE your staging date.
But your work isn’t yet done. Up to 6 weeks from the staging date you must tell your staff. Then, within 5 months you must have completed a declaration of compliance. This is known as registration.
Once registered you will be required to keep proper records and you will have to continuously fulfil your on-going responsibilities. This means continuous red tape until your business ceases to have employees. You will need to keep records relating to auto enrolment for 6 years and any opt-out notices for 4 years.
As we know, things in life change and someone today thinking of starting a business and maybe in the future employing staff, will also be required to continuously consider their own position.
As an example, consider a business with one employee who is now 21. This company has no current requirements to meet auto enrolment; however, when the employee becomes 22 the auto enrolment requirement will kick in.
There simply is no shying away from this, no burying your head in the sand and absolutely no way to avoid this new regulation. If you aren’t an employer then naturally this won’t affect you and very small limited companies with 1 director (possibly more) can also opt-out from this process.
My advice is to take action now. The Pensions Regulator has produced an excellent, easy-to-read manual which takes you through the whole process step by step. “The essential guide to automatic enrolment” is going to become my own personal support document so I know I am sticking to the new regulations. In addition I will be using an experienced pensions’ advisor to ensure that I make the right choices when it comes to selecting a pension scheme for my staff.
The rather confusing part of this for me, has been the fact that different businesses have different staging dates. This means that one company working in say Enfield, North London may have a staging date in 2016 whilst 10 miles up the A10 another business in the same field working out of Hertford, may have a staging date 12 month later. Not exactly fair on the businesses with the earlier date, as this will involve a greater cost for employment and therefore, for a short period, create an uneven commercial playing field.
For the largest of companies in the UK this additional cost has been in place since October 2012. By 2018 all UK employers will be using auto enrolment.
With the greatest respect, I am very concerned for some of my clients who are more “ostrich-like” than someone like me. This is scary legislation that puts a great deal of responsibility on employers and involves some very worrying penalties.
My approach, therefore, is to break this process down into a series of things to do, and to know the exact deadlines. Quite simply, I will use professional support and be happy to pay the extra cost to set this up correctly and to avoid any complaints.
My advice is put the kettle on, make yourself a strong cup of tea, open a packet of biscuits and download the guides which are freely available to you on-line at http://www.thepensionsregulator.gov.uk. Create an action plan and keep your head well and truly out of the sand.