Tax Matters: Auto enrolment for pensions is on the way, says Chris Annis
- Credit: Archant
The Government estimates that millions of people in the UK are currently not saving enough for their retirement.
To help solve this problem, they have introduced legislation that means every employer will have a duty to put a pension scheme in place.
As an employer you’ll also have to automatically enrol certain workers into the scheme and make contributions on their behalf.
This presents a huge challenge for your business. You’ll need to understand your duties, the impact and cost for your business and the changes you’ll have to make.
Your business will be allocated a staging date which is the date by which you must have a qualifying scheme in place. You must have your scheme in place by this date or face the penalty system which, after an initial warning, is charged at between £500 - £5,000 per day, for companies with between five and 500 employees.
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A hot topic of debate is the pension industry’s ability to cope with the amount of new schemes that need to be arranged during the next two years.
There is speculation that some providers will effectively be shutting their doors to new business by the end of this year.
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A recent survey of the industry’s state of readiness for auto-enrolment found that pension providers will be operating at full capacity by May, and will be running at seven times normal capacity at the end of the year.
With over 130,000 employers required to have schemes in place during the next two years the pension providers will certainly be under intense pressure.
An alternative is “NEST” or one of the other master trust providers but these will not deal with the administration of arranging, monitoring and reporting on the scheme to the regulatory authorities will be a vast paperwork burden on any employer and should be considered seriously before opting for this route.
Whether the industry will cope is still to be seen but your business should start preparing now before it’s too late.
: : Please note the above does not constitute financial advice and LB Group cannot be held responsible for any errors or omissions.
If you need help or advice on any of the above topics please contact LB Group on 01473 359720 or email Ipswich@lbgroupltd.com
Chris Annis, director LB Group