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So we are to leave the EU. This news has been followed by the resignation of David Cameron as Prime Minister. Today we delivered a presentation to members of the Institute of Directors on Auto-Enrolment, but it is important to acknowledge the elephant in the room; the UK’s future lies outside the EU.
Auto Enrolment is one of the biggest current opportunities for accountants, with over 570,000 small companies reaching their staging date over the next 12 months. However, only 3% of those surveyed by Pension PlayPen self-identified themselves as accountants, with the largest single group being Financial Advisors, at 51%. So why are Accountants missing out on this opportunity?
What is Auto Enrolment?
In a world of ageing populations and budget deficits, the emphasis is shifting from state pensions and provisions onto the individual and their employer.
Auto Enrolment is a Government initiative making employers legally required to help employees save for retirement.
Employees need to be enrolled on a scheme if:
- They are aged between 22 and state pension age
- Earning more than £10,000 a year and
- Working in the UK.
Every company who has a PAYE scheme with eligible employees is obliged to register a pension scheme, and if it is not done by the staging date there will be an automatic penalty of £400.
It is worth noting that even when no employees appear to be eligible, it is still necessary for a pension scheme to be in place in advance of the staging date, in case employees are eligible at a later date.
Minimum employer contributions are qualifying earnings of:
- 1% until September 2017
- 2% October 2017 until September 2018
- 3% October 2018+
Different types of contracts
We note that the process is similar for both temporary and permanent staff, with even zero hours contracts potentially eligible.
Opt-out
Eligible employees can opt-out and current opt-out levels are estimate to be 10-12%, the key is for the employees to have the choice. The majority of our Director-only clients have already been opted out as they seek to make personal arrangements instead.
Postponements
This is an additional flexibility for employees to postpone for a period of up to three months. Our clients are generally opting to do this as it gives them more time. This can take place from:
- The employer’s stage date
- The employees first day of employment
- When employee becomes eligible
Qualifying Schemes
The pension scheme must meet certain minimum standards. There are literally thousands of options here, each of which offers different rates and ongoing costs.
We offer our clients two solutions, one which is payable by the employer annually and one which is “free” to the employer as the fee is taken from the employee funds. They fully integrate into our payroll software.
The Government schemes, such as NEST and NOW appear to be popular as they are also “free” to the employer, but from what we have heard, they are proving to be an administrative nightmare.
To find out more get in touch with us if:
- Your existing payroll provider doesn’t have a solution
- You have clients, without a solution yourself.
We are available on 0800 140 4644 or at [email protected].
