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Auto-enrolment for workplace pensions
When it comes to workplace pensions, “we’re all in”. Or so said the slogan that accompanied the Government’s awareness campaign for auto-enrolment.
It’s not entirely accurate though, as there are a few exemptions to the rule which may affect smaller businesses.
In this blog post, we’ll look at what the new auto-enrolment laws mean for you, and identify the parties who won’t have to abide by the new legislation.
First things first, what is auto enrolment?
Auto-enrolment dictates that any UK-based worker between 22 and the state pension age must be enrolled into a workplace pension scheme if they earn more than £10,000 per year.
The process has been rolling out across the country for a while now (starting with the largest and most complex organisations), with a series of staging dates based on company size and PAYE scheme).
Most small businesses are required to comply by early 2017, with the final staging dates in 2018. If you’re not sure when you need to complete auto-enrolment, you can check your staging date here: http://www.thepensionsregulator.gov.uk/employers/staging-date.aspx.
Exemptions to Auto-Enrolment
If you’re a freelancer, contractor or operating a very small limited company or partnership, you might not be obligated to set up a workplace pension. But it’s not the size of your business which is the deciding factor, it’s the composition.
Indeed, you’ll only be exempt from auto-enrolment if your business comprises solely of Directors (regardless of how many there might be).
This means a larger business may be exempt while a smaller one remains bound by the rules. For instance, a business with four Directors (but no employees) would be exempt, and a smaller business with two people - one Director and one employee - would not.
Of course, Directors can have employment contracts too, but you’ll still be exempt provided this applies to none or just one of your Directors. If more than one Director has an employment contract, you will be duty bound to make pension provisions.
What to do if you are exempt?
If you believe your business is exempt from auto-enrolment, but you’ve received a letter from the Pension Regulator to notify you of the new legislation, don’t just throw the letter away. Contact the Pension Regulator and let them know that you don’t have any employees, or none eligible for a workplace pension under the criteria outlined above.
You’ll need to confirm your 10 digit ‘letter code’, which will be included on the initial correspondence, plus your PAYE reference and basic business details.
In informing the Pensions Regulator of your exemption, you’ll ensure no unnecessary communications (or penalties) moving forward.
What if your circumstances change?
If you currently fall under one of the exemptions for auto enrolment and at a later date your situation changes you may need to set up a pension scheme at this point. i.e. you were a director only business but now you have employees.
Keen to know more about your pension obligations?
Give us a call on 0121 667 3882 and we’ll help you put the necessary pension plans in place.
You may find these blogs of interest too:
Contractor expenses- an introduction
Three ways your accountant can help grow your business
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