Auto-enrolment pensions were introduced back in October 2012. Since then, it has become a legal requirement for employers to set up a pension scheme for ‘eligible workers.’ So, what do employers have to do and what are the pension options available to them?
Most employers now know that legally they have to set up a workplace pension scheme and make contributions on behalf of their employees. This applies even if you employ just one person. So how does the whole auto-enrolment process work?
A workplace pension scheme is arranged by, or on behalf of, an employer and helps eligible employees save for retirement.
A percentage of the employees’ salary is paid into a nominated scheme along with employer contributions and builds a pot of money ready for retirement. Like employees, employers have to meet a minimum level of contributions for all enrolled scheme members.
Employees can opt out of workplace pensions if they want to, but that means losing out on the contributions that employers would make and the tax relief they would get from the government.
Employers need to enrol all employees who aren’t already enrolled in a suitable scheme, are aged between 22 and State Pension age, earn more than £10,000 and usually work in the UK.
Your enrolment duties start from the date on which a member of staff joins your business. If you start late, you’ll need to act quickly – you may have to make up missed contributions from the employee as well as yourself. Fines and penalties may also apply.
The most commonly offered scheme is a defined contributions (DC) pension in which your financial contributions are invested. There are several types of DC pension available for you to choose from.
The basic workplace pension is suitable for any employer with usually a minimum of 5 contributing employees joining the scheme. It’s easy to set up with a default investment option and can be managed online.
For more flexible solutions, there are contract-based pension schemes that are designed to give your members control and flexibility over their investments and retirement, along with support and online investment planning tools. These include Group Personal Pensions and Group Self Invested Personal Pensions (SIPPs).
For medium to large employers, there are also trust-based pensions, offering specialist governance, implementation and asset transition services.
At Kellands, we have the experience and expertise to help you with all aspects of the auto-enrolment process. We can explain to exactly what auto-enrolment entails, how much it will cost and which employees will need to be enrolled in the scheme. We can also help in selecting the right pension scheme option for you.
Contact us today, to find out more.