What is auto-enrolment?
Automatic enrolment is a government initiative which aims to help people save more money for later life through a compulsory workplace pension scheme. This means that every employer, no matter what size, is legally obligated to provide a pension for all eligible employees. If your business does not adhere to these guidelines then you could face substantial fines or even prison.
The scheme was first introduced in 2012 for large businesses and has gradually been rolled out to businesses with smaller numbers of employees. All businesses will be enrolled by 2017.
Those who work in the UK, are aged between 22 and the state pension age, are not already in a pension scheme and earn more than a set threshold (currently £10,000 pa) must be
automatically enrolled. Employees outside these criteria, aged between 16 and 75 and earning over a lower threshold (currently £5,824 pa), need not be automatically enrolled but may opt themselves into the scheme.
It’s a key part of the scheme that, even if employees don’t want to be enrolled, you must first auto enrol them in your pension scheme and then allow them to opt out. If they still meet the criteria, these employees will be automatically enrolled again in three years time.
Why is the government introducing auto-enrolment?
The primary reason is that people who reach pension age often have not made sufficient provisions to top up their state pension.
As people live longer and the percentage of pension-age people increases,the Government wants to encourage people to get into the habit of saving for the future.
By the year 2031 more than 20 million people will be 60 or over, compared to 14.7 million today.
When should I auto-enrol my business?
The exact date that your business is obliged to enrol depends on the number of employees and the date set is known as your “staging date”. Most small businesses (less than 30 employees) will be allocated a staging date between 1 January 2016 and 1 April 2017.
The Pensions Regulator, who administers and regulates auto enrolment, will send a letter out 12 months before your staging date and it’s wise to set the wheels in motion at this time to give
yourself enough time to prepare and ensure your business is ready. For example you will need time to find a suitable pension provider and make sure you assess and notify your employees in
If you have yet to receive your letter and want to know when your staging date is, follow the following link and enter your PAYE reference: http://tpr.gov.uk/employers/to...
What do I do next?
- Ensure you know your staging date.
- Engage the help of a dedicated pension provider or contact us for help and advice.
Contact SIL Solutions (Tax advisers with a difference)
Tel: 0207 993 5016
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