Pensions

Make sure your business fulfils its obligations

A workplace pension is a way of saving for retirement arranged  through an employer. It is sometimes called a company pension, an occupational pension or a works pension.

New pension laws mean every employer must automatically enrol their  staff - subject to qualifying criteria - into a workplace pensions  scheme and make mandatory contributions to their employee's Pension. 

Click here to see if your employees will need to be automatically enrolled.

Why is this happening?

State Pensions are becoming unsustainable and this situation will only worsen as people live longer. Employers and employees will share the responsibility and cost of retirement. 

"More people having to defer retirement" - Daily Telegraph, 29th August 2011 

"Half of pensioners too broke to stop work" - Daily Mail, 15th January 2011 

"Millions must work after 70" - Daily Express, 18th May 2011

When will these changes affect me?

It's important for employers to be aware of the deadline when automatic enrolment will impact them, known as the ‘staging date'. The requirements are staged over time, the largest corporations started auto enrolment in October 2012 and the very smallest employers will all become subject to these changes by April 2017.

Companies with less than 50 staff must implement the scheme from April 2015 at the earliest and those with 30 staff or less by October 2015, depending on their individual staging date which is determined by their PAYE Reference number.

Click here to find out your own staging date based on your PAYE reference number.

Businesses should plan well ahead of their staging date, amendments in areas like payroll, human resources and IT will need to be considered. The average time to prepare for implementation of a qualifying pension scheme is c.18 months and therefore all businesses are recommended to start preparations as soon as possible.

Click here to see if your employees will need to be automatically enrolled.

To find out your own ‘staging date' click below.

Staging date

Employee enrolment criteria

An employer is required to enrol an employee into a workplace pension if the employee:

  • is not already in a qualifying pension at work
  • is aged 22 or over
  • is under State Pension age
  • earns more than £10,000 a year (figure subject to change)
  • works in the UK

This criteria applies even for those business owners that employ their spouse. Those workers who aren't eligible to be automatically enrolled may be able to opt-in and equally, some staff will elect to opt-out of saving for retirement in this way. If an Employee does opt out it is the employer's responsibility to ensure that they are automatically enrolled back into the scheme every 3 years.

What if I don't comply?

Employers must inform The Pension Regulator of their qualifying  workplace pension scheme within 4 months of the employers staging date.  Registration must be completed within four months of the employer's  staging date and will have to be updated every three years thereafter. 

The Pension Regulator will have the ability to impose penalty notices if an employer does not comply with their new duties. 

  • A fixed penalty notice will be issued if you don't comply with statutory notices, or if there's sufficient evidence of a breach of the law. This is fixed at £400 and payable within a specific period.
  • An escalating penalty notice for failure to comply with a statutory notice. This penalty has a prescribed daily rate of £50 to £10,000 depending on the number of staff you have.
  • A civil penalty for cases where you fail to pay contributions due. This is a financial penalty of up to £5,000 for individuals and up to £50,000 for organisations.
  • Where employers fail to comply with a compliance notice or there is evidence of a breach, a prohibited recruitment conduct penalty notice can be issued. This penalty has a prescribed rate of £1,000 to £5,000 depending on the number of staff the employer has.

How much will the employer and employee have to contribute?

Employer and employee contributions will be tiered and will increase gradually over a 2 year period.

Minimum Employer and Employee contributions are calculated based on the employee's Banded Earnings: £5,824p.a - £42,365 p.a (2015/2016).

See below the minimum contributions applicable to all gross earnings (within the band) including wages, salary, bonus, overtime, commission, statutory sick and maternity pay and when they come into effect. Employees benefit from tax relief upon their contributions.


  Minimum Employer
Minimum Employee
Tax Relief
Oct 2012 - Sept 2017
1% 0.8%
0.2%
Oct 2017 - Sept 2018  2% 2.4%
0.6%
From October 2018  3% 4%
1%

Remember, employer contributions are part of an employee's benefits package, they needn't be an additional burden upon your business and early implementation as part of annual reviews can help your business accommodate these gradual cost increases.

When can employees access their pension fund?

The scheme has been set up specifically to encourage everyone to save for their retirement. For this reason any money paid into your pension cannot be accessed until your 55th birthday.

Once you retire you'll be able to draw 25% of your pension pot as a tax free lump sum.

While 25 per cent of the fund can be taken as a tax-free lump sum, anything above that amount will be treated as income and taxed accordingly. So if a withdrawal takes an individual into the higher rate tax bracket in that year, 40 per cent tax will be payable.

And once moved out of the pension, it will no longer be able to grow tax-free if ISA allowances have been used up.
From March 27, 2014 anyone with total pension assets of £30,000 or less will be able to take their fund as cash, compared to a limit of £18,000 previously.

And anyone with more than £30,000 pension savings but who has a separate pot with up to £10,000 in it will also be able to take that smaller pot as cash. Previously, only small pots up to £2,000 could be taken as cash.

Can an Employee choose to opt out?

Yes, Employees can choose to opt out of the auto enrolment process  however, it is the Employer's responsibility to ensure that they are  automatically enrolled back into the scheme every 3 years.

How can ActSmart help?

ActSmart have made arrangements to introduce you to Elliott Sanders of  Copthorne Hundred Wealth Management, a Partner Practice of St. James's  Place Wealth Management. 

St. James's Place Wealth Management are one of  the leading wealth management organisations in the UK with a national  network of advisers. Using their experience, they offer businesses and individuals a wealth management service, incorporating pension advice. The advice is face-to-face and tailored  to your business or personal objectives.

  • Complimentary initial consultation
  • Face-to-face advice
  • Impartial advice
  • Advice is guaranteed by St. James's Place when recommending any products or services provided by the St. James's Place Group


St. James's Place Wealth Management are authorised and regulated by the Financial Conduct Authority. 

http://www.copthornehundred.co.uk/

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What should I do next?

ActSmart can introduce you to Elliott Sanders of Copthorne Hundred Wealth Management, a Partner Practice of St. James's Place Wealth Management who can offer all businesses, no matter what size, advice on pension auto-enrolment.

Register via the form below to get in touch with Elliott Sanders for your free consultation 

Every business should also ensure they are part of the ActSmart  community to be kept up to date with all changes related to Pension  auto-enrolment. You can join for free by clicking below

Join for free  

For further information please visit: http://www.dwp.gov.uk/policy/pensions-reform/workplace-pension-reforms/.  

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