We are living longer and healthier lives, with the likelihood of spending more than 20 years in retirement. The government has indicated that millions of people are under-saving for their retirement. There are currently four people of working age for each pensioner in the UK. In 2050, the ratio will have fallen to 2 for 1. Pension reforms are now being introduced to help individuals save for their retirement.
Employers now have to “automatically” enrol employees into a qualifying pension scheme, by a set staging date. To find out your staging date, visit The Pension Regulator (TPR) website www.thepensionregulator.gov.uk.
Transition for current pension schemes
If you have a pension scheme in place, it may already qualify for auto-enrolment purposes. Many of the larger pension providers will not accept contributions at the minimum auto-enrolment contribution rate of 1% for employee and employer. If you decide to use an existing scheme as your auto-enrolment pension scheme, the contributions may need to be increased. This will also raise the employer’s pension cost.
Planning the changes
Although costs vary, it’s important to assess the likely impact for your organisation and to plan ahead. Planning is key to any major change, but pension changes will have a long lasting impact on every business. Research conducted by SAGE UKI of 500 SMEs found 17% were concerned that the size of their organisation meant they will not get a competitive rate.
Commenting on the changes, Neil Cameron, Chiene + Tait Payroll Manager adds “Auto-enrolment does not mean that SMEs need to take on more staff, with correct planning and making a few changes to daily payroll processes it is manageable. Indeed, many of the processes can be done by using payroll software.”
Auto-enrolment will cost British SMEs up to £28,300 per business and take up to 103 man days. For small businesses, the set up fee stands at an average of £8,900. Employers with up to 100 employees will have to spend £12,600.” Centre for Economic and Business Research (CEBR)
If you have a question about auto-enrolment processes and planning, please contact Neil Cameron on 0131 558 5800 or email firstname.lastname@example.org.