Auto Enrolment (AE) Background
AE was introduced by the government for a number of reasons, including:
- Get people saving, only half the population is currently saving enough.
- To allow for a longer retirement.
- To provide additional income on top of the State Pension – the State Pension provides a maximum income of £115.95 a week (single person’s allowance for the tax year 2015/16). It is likely that you will need more than this, so the government wants to encourage people to save in other ways.
Where we are now
It’s been 3 years since AE started. The biggest employers were enrolled first and now it’s time for the smallest employers to start to set up their schemes. With up to 1.8 million small and micro employers left to go between now and 2018, there’s still quite a bit more work to do.
Employers have been receiving staging date letters which sets out when they must have a scheme in place by. Here’s a summary of what they need to do.
- If an employer doesn’t already have an eligible pension scheme they must register with one of the AE providers.
- Staff need to be assessed to see which bracket they fall into. Not all staff are eligible for automatic contributions. It depends on age and earnings.
- Write to staff letting them know their status and eligibility.
- After the staging date deductions are made from salary as required by government. The employer can choose to contribute more if required.
- Workers can opt out, but only after being enrolled. They are then automatically re-enrolled every 3 years. They can choose to leave again if they like. With any contributions reimbursed.
- It is against the law to force an employee to leave the scheme.
Penalties for non-compliance are severe. There is a one off penalty of £400, then £50/day for employers with 1-4 staff and £500/day for those with 5-49 staff. And £10,000 / day for employers with more than 500 workers!
We are now set up to help businesses with their auto enrolment requirements. Give us a call today and let us do the hard work for you!