Workplace Pensions: Avoid the Traffic Jam

Under new pension laws,  UK employers have to automatically enrol their staff into a workplace pension if they meet certain criteria. The new rules have been gradually phased in since 2012, with the larger firms going first. 

Presently, medium-sized firms are “staging”, but from October 2015, employers with less than 30 employees will begin to stage.

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Your staging date is when your automatic enrolment duties first come into force and is based on the total number of people in your PAYE scheme (i.e. your payroll) on 1 April 2012. You can find out your staging date using your PAYE reference on the Pension Regulator's website here. Remember, you can bring your staging date forward but you can’t make it later!

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October 2015 may seem a long way off, but pension providers are referring to auto enrolment as a 'tsunami' and are pleading with employers to start planning their auto enrolment solution at least a year in advance. In January 2016, 30,000 firms will have to comply and the situation only gets worse, rising to more than 70,000 firms in each of the months of January, February and March 2017!

There is a checklist for employers to do as part of their planning process for auto enrolment. But one of the key tasks, will be to select the pension scheme to use. If you don’t have an existing scheme you can use, what are the main options?

There are four main providers of pension schemes:

1. National Employment Savings Trust (NEST)
2. ‘Industry-wide’ schemes such as NOW Pensions
3. Traditional providers, L&G, AVIVA, Scottish Widows etc.
4. Affinity group schemes, such as the TaxAssist Accountants Pension Service

National Employment Savings Trust (NEST)

NEST is an independently-run, not-for-profit pension scheme that is backed by the Government. It is designed for low-to-moderate earners, those whose employer didn’t previously offer a pension scheme and self-employed business owners themselves. It will be responsible for picking up schemes that are not placed elsewhere. At the moment, there is a cap on contribution levels and you can’t transfer savings from other schemes.

Traditional pension providers

The more traditional providers are keeping their powder dry. All demand minimum numbers of employees, at least 10 - sometimes 20 - and then require substantial contributions are made (typically starting at around £100 per month per employee). These rigid terms are going to be a barrier to many small and micro employers.

Affinity schemes

The final option is affinity schemes, such as the TaxAssist Client Pension Service. These bring together a traditional pension provider, a firm of financial advisers and a portal to manage the scheme and report to the Pensions Regulator.

The key features of our scheme are:

• Help and support
• No minimum numbers and no minimum contributions
• Low charges
• No contribution charge – 100% allocation
• Flexibility

Recently, the Pensions Regulator proudly announced that four million employees had been enrolled into a workplace pension as part of auto enrolment. Sadly that number is the tip of the iceberg in terms of how many employees will need to be enrolled in the coming months.

We can help

All employers will have an obligation to comply with the new workplace pension rules, regardless of their size, although the extent of their responsibilities will vary.

Non-compliance can lead to fines starting with a fixed penalty of £400 but escalating to daily fines set at a minimum of £50 per day. Civil penalties and court action can follow for persistent failures.

Large businesses are likely to have existing pension schemes and advisers in place. But there is very little interest in small and micro businesses from traditional pension providers.

Fortunately, with a network consisting of more than 50,000 clients and offices across the country, we have been able to provide our clients with the TaxAssist Accountants Client Pension Service that comes with all of the perks that larger businesses get, but at an affordable price.

As your accountant, we can also look after the day-to-day payroll processing as well as managing the reporting requirements to the Pensions Regulator. This makes the whole function much more streamlined and gives you peace of mind that your business is compliant.

Contact us today to find out more about our payroll services and client pension scheme for small business owners on 01603 258690

Date published 30 Apr 2015 | Last updated 20 Sep 2022

This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.