Auto-enrolment is sweeping the nation. By Summer 2017, every employer will need to have arranged and be contributing towards a workplace pension scheme – and to register their arrangements with the Pensions Regulator.
With one in seven retirees leaving work without any form of personal pension, the initiative – in principle – undoubtedly shows proactivity on behalf of the government. But with such a monumental change to our pensions system now fast approaching, KPMG Small Business Accounting poses the key question: has enough been done to prepare small businesses for the big switch?
Unprepared for auto-enrolment
The evidence would suggest not. More than a quarter (27%) of the UK’s SMEs are yet to even begin the process of finding a provider. Add that to the fact that the process takes, on average, over three months to complete and costs small businesses around £9,000 to implement, and it’s safe to say that a number of companies will be facing a mad dash in the run up to deadline day. In fact, my experience is that most employers wished they’d started the planning process a lot earlier.
The deadline for businesses with 30 to 39 members to comply with AE was on 1 October 2015, while for businesses with fewer than 30 members of staff , staging is staggered over years, starting from June 2015, depending on the last two characters in their PAYE reference number.
Do I have to register for AE?
It might seem tempting, especially for microbusinesses with only a handful of employees, to simply ignore the auto-enrolment deadlines – but do this at your peril. Non-compliance by an employer with a PAYE scheme of between five and 49 people could risk fines of up to £500/day! So far, the Pensions Regulator has confirmed that they have fined around 600 employers for non-compliance.
Aside from the costly penalties, there are a number of reasons why pension reform is urgently needed – in fact; some have argued the new legislation might not go far enough. People are living longer, which as well as putting pressure on public services, is extending the time period that we are reliant on our savings and pension funds. From that perspective it’s no surprise that some think tanks are suggesting the UK target of 8% for pension contributions is not high enough.
Yes, that means you too!
The government requires even the smallest of businesses to eventually sign up. So if you hire a nanny or a small team of part-time staff, you will need to enrol.
While the reforms are necessary, there is undoubtedly more that could be done to help prepare businesses, especially those who may be unaware of the necessity of enrolment. Failing to do so could result in more people working illegally, not paying tax and not putting enough aside for retirement. A more integrated approach across government and the business community would surely ease concerns.
How can I get everything sorted in time?
Businesses have an ongoing responsibility to stay compliant, adding and removing joiners and leavers, as well as assessing employees as their rates of pay change and dealing with opt-outs which poses a significant challenge in itself.
Fortunately, registering with a pensions provider and completing the above tasks will keep you compliant, legal and most importantly, provide your staff with secure savings for retirement.
However, this will undoubtedly require time and resource, which we at KPMG Small Business Accounting understand could be better spent growing your business.
KPMG Small Business Accounting can help businesses get on top of their auto enrolment programme. We can provide advice on how to deal with auto-enrolment including helping you to choose a provider, advising you on the new requirements and preparing you for the ongoing systems and communications challenge.
Many employers believe that their payroll provider will deal with the requirements. Whilst they may be able to provide support, the duty to comply remains an employer one so it is important to start planning now.
We’ll also run your payroll and make sure it meets HMRC standards for real-time information (RTI).
That includes calculating PAYE and NI liabilities, sorting out holiday pay and dealing with maternity and paternity leave. We’ll also agree a payroll schedule with you and give you a draft calculation to check three days before payday.
It’s that simple.
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