Pensions and Payroll may not be everybody’s idea of a good time but is certainly taking a lot of time and energy at the moment, and things are set to only get even more exciting as we head to the large crush of 2016.
Nothing seems straight forward about pensions and certainly we know of financial advisors that have stepped back, and there are reports of pension companies dropping the schemes or only accepting companies above a given size. Auto-enrolment should not be taking as much time and causing as much mayhem as it appears to be doing. But is there a simple solution?
Alas we do not know of one, if it exists. All we can suggest is join everyone else and muddle through. It is not actually as bad as it sounds, and it is just that everything has to be incredibly precise and well documented. From our payroll perspective we have had some headaches, but actually things are now relatively quiet.
One of our issues has been “how long is a three month postponement period?” Which you would think should have been straightforward but is actually influenced by things like pay interval ie weekly vs monthly vs 4-weekly vs 2-weekly. The reassuring thing when speaking to the pension companies is that we are all on a learning curve together.
At Payroll Options we can provide data to aid with pension or middleware requirements and we can perform the assessment. This is a small but vital part of the process, but as it can happen with no intervention from our clients and very much in the background, it is probably perceived as causing the least problems.
The actual auto-enrolment pension is just a pension that has to operate within a few defined parameters (I realise this may be a slight oversimplification). The responsibility for the parameters and the whole scheme is with The Pensions Regulator, in turn set by government.
As well as specific pensions schemes there are also minimum defined contributions. By October 2018 the minimum will be 8%, with the employer’s contribution at a minimum of 3%. This means that an employer could make the full 8% contribution if they wished, or stay with the minimum and the employee making up the 5% required.
The assessment is performed on the required date and there are four outcomes that we are aware of:
- Automatically enrol – Earning over £833 in a month, and between 22 years old and the statutory pension age (SPA).
Has a right to opt in – Earning from £481 – £833 and between the ages of 16 and 74, or earning over £833 but aged between 16 – 21 or the SPA and 74.
Has the right to a pension scheme – earns £481 and below, and aged 16 – 74
No defined position – Aged over 74 or below 16
(Taken from the The Pension Regulator website 9.9.14 but please check for up to date information)
It is worth mentioning that an employee cannot “opt out” until they have been enrolled and the company cannot take any action that could be seen as encouraging employees to leave the scheme.
There is the opportunity for confusion at every stage of the process. I hope the explanation of the possible outcomes of an assessment will be useful, and help people understand a little more and maybe have more of an idea on the likely impact on their workforce. If your company has yet to make a decision, do not put it off until the last minute. Take action and remember we can help. For complete and accurate information please try www.tpr.gov.uk
Robert Lorrimore 9.9.14