Auto-enrolment pension planning

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Auto-enrolment pension planning

What is auto-enrolment?

Starting in October 2012, the Government is introducing a new piece of legislation for pensions called auto-enrolment. The legislation is designed to ensure all employers enrol staff into a pension scheme and start funding contributions.

Unlike stakeholder pensions, auto-enrolment means workers initially have no choice other than to join a pension scheme and for both employers and employees to start paying into it.  This added burden of expenditure needs to be carefully planned and business owners and financial directors need to be aware of the company’s future liabilities, especially in relation to wage negotiation.

How will auto-enrolment affect my business?

At first, auto-enrolment may seem a simple task but, when the rules are considered in detail, it’s not so easy. For instance, take the question of which of your employees are included. You may think your staff are characterised in the same sort, but consider the different categories under the new auto-enrolment rules – jobholder, eligible jobholder, non-eligible jobholder and entitled worker. Knowing which categories your staff fit into can be more complex than it seems – the age of staff and their salary levels are relevant to their eligibility and must be strictly monitored. Interestingly, even self-employed consultants could be included as contract workers.

The new auto-enrolment rule states that every company with one or more employees will be required by law to automatically enrol all eligible job holders into a workplace pension scheme and make an employer contribution towards it. Eligible jobholders are those aged between 22 and the state pension age (SPA) earning more than the minimum salary threshold, which is currently £7,475 per annum.

What if my business already offers staff a pension scheme?

If your business currently runs a pension scheme, you are not exempt from the new auto-enrolment rules. You will need to consider whether it fulfils the auto-enrolment employer duties (outlined above) and therefore if your existing pensions arrangement is still an appropriate vehicle to provide this benefit.

The Government has introduced a new workplace pension scheme, the National Employee Savings Trust (NEST). We believe this pension solution will inevitably deliver businesses a reduction in charges.

Moving forward

The rules around the auto-enrolment pensions initiative are complex and we suggest businesses start planning for auto-enrolment now and take advice from a firm of professionals.

Generation Financial Services has many years’ experience in providing pension benefits and is currently helping businesses of all sizes plan for auto-enrolment, and in most cases delivering to clients substantially reduce costs with improved product delivery and communication of benefits.

To further assist with planning and implementing auto-enrolment, Generation Financial Services has partnered with Bond Payroll Solutions to ensure the smooth transition of our clients’ payroll to manage auto-enrolment.

For more information and advice on auto-enrolment and NEST pensions, or for a free no obligation consultation of your pension options, contact us to speak with a Generation Financial Services pension specialist.

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