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Workplace Pensions Adviser Cambridge
Workplace pensions are the new normal and were introduced to help employees save for their retirement. As of 2012 the government has made it the law that all employers must provide a workplace pension scheme for all eligible employees.
The roll-out of the staging process meant that by April 2018 all employers had to provide a qualifying workplace pension scheme and automatically enrol their eligible employees.
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How does a workplace pension work?
A workplace pension is designed to help employees save for their retirement and provide a lost-cost method of doing so. A portion of their qualifying salary is paid into the scheme every time they get paid, normally monthly but in some cases weekly. As their employer you will also have to contribute and the government contributes too in the form of tax-relief.
The staging process:
- The first step of the process required employers with over 120,000 members of staff to automatically enrol their employees by October 2012
- By March 2013, businesses with 10,000 staff had to enact their workplace pension scheme
- November 2015 was the start of the staging process for employers with less than 30 eligible workers
- By February 2018 all employers, no matter how big or small, new or old had to have a workplace pension in place and enrole all eligible staff
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Cost to the employer
Equally there is has been a tiring process for the contributions employers and their employees have had to pay into their workplace pension:
- Workplace pension regulations stated that until 5th April 2018 the minimum employer contributions was 1% – the same for the employee, making a total of 2%
- Between 6th April 2018 until 5th April 2019 the minimum employer contribution was 2% and the employee was 3%, a total contribution of 5%
- From 6th April 2019 the minimum employer contribution rose to 3% of qualifying earnings and the employee contribution rose to 5%, making a total of 8%
Staying compliant
All employers must now offer a workplace pension scheme set up. However it is still important to regularly assess the eligibility of employees and suitability of the scheme because:
- Employers’ legal obligations do not cease once the scheme has been set up. There is a 3 year cycle of re-enrolment and eligibility assessment. For example, any employees who may have opted out will be automatically enrolled again and the eligibility of employees to be members of the scheme has to be re-assessed.
- Employers must complete a declaration of compliance whether they have staff to enrol or not. The declaration of compliance must be completed within 5 months of the pension scheme being in force. Re-enrolment of staff is not optional, as a legal duty it must be complied with or the firm may face a fine. Another declaration of compliance is required at re-enrolment.
- In between the 3 yearly declarations of compliance it is also advisable for employers to complete a self-certification record of the contributions paid and the basis on which those contributions have been paid, i.e. tier 1, tier 2 or tier 3 earnings – sometimes referred to as step 1, 2 or 3.
- Penalties for not complying with workplace pension regulations can be high. The Pensions Regulator can issue a fixed penalty notice of £400 and then hit employers with escalating penalties, the costs of which vary with the size of the firm but can reach £10,000 per day.
Assessing the suitability of your pension scheme
You may need help assessing the suitability of your current workplace pension scheme to make sure that it is still right for your company. You may need help assessing the eligibility of your employees. You may need help with your statement of compliance.
Therefore, employers should choose advisers who are suitably qualified to give them advice especially as employers are expected to re-assess these factors at regular intervals. For example, the age of your current workforce or contracts of employment may change over time which might have a direct impact on the suitability of the original workplace pension scheme chosen. Further, some workplace pension scheme providers are more efficient than others. If the scheme provider’s administration is poor it can lead to problems for the employer and employees.
Implementing a workplace pension scheme was only the first step employers needed to take. Businesses need to be mindful that they remain compliant with the law in order to avoid any penalties in the future. Furthermore, it is in theirs and their employees’ interests to invest in a suitable workplace pension plan. You may need help and advice on making these decisions so it is best to speak to someone who is independent.