Every employer in the UK must place their staff into a pension scheme and make contributions into it. This is known as ‘automatic enrolment’ and became a legal requirement under the 2008 Pensions Act.
Staff who fall under these compulsory requirements are those aged between 22 and their state pension age, and who earn at least £192 a week or £833 a month (around £10,000 per year).
The minimum amount you must pay equates to 1% of your employee’s earnings and be deducted each month by a set date.
As an employer, The Pensions Regulator (TPR) will have sent a notification letter informing of your staging date. This is when your legal responsibilities to pay into the pension scheme begin.
Once you are aware of these responsibilities as an employer, you then need to set up the right pension scheme for your workers. If you’re unsure of how to do this then it’s always best to seek professional guidance to prevent mistakes from happening.
It’s advisable to make plans for your pension scheme a few months before the staging date so you don’t miss the TPR registration deadline. Missing the deadline can result in fines that will increase per day depending on the size of your company.
To begin with, visit the official website and use the ‘Duties Checker’ facility, using the PAYE reference and letter code found on the initial TPR correspondence sent to you. You’ll also need the details of anyone you employ.
The website also has a ‘Choose A Pension Scheme’ facility if you’re unsure which category your company falls into. You’re advised to complete this around six months before the staging date as the process can be drawn out.
There are many schemes available that aren’t listed on the website, however – this is where utilising the know-how of a professional accountancy firm will come in handy. They’ll ensure you’re registered into the right scheme and comply with the relevant laws, allowing you to grow your business with added peace of mind.
The cost of the Pension Scheme is something you should also bear in mind as the business owner. Again, a legal firm will best minimise spending and help you prepare for changes in contribution amounts. The current rate of 1% of employees’ salaries will rise to 3% after 2017.
If you’d like help setting up your Pension Scheme, contact us today.
If you found this article interesting, you may like to read Learning More About HMRC Penalties for Businesses.