By late 2017, in just 3 years time, every employer in the country, even if employing just one person, being themselves, will have to have put in place a contributory pension scheme. The largest employing companies have already been through the process of auto enrollment.
This is a serious attempt at bringing the UK’s retirement planning somewhere akin to countries like Australia and US, ensuring less reliance on the State Pension. There are clear rules regarding differing employee categories, salary definitions, increasing contribution rates and what to do if an employee wants to opt out.
The surprising fact is the opt out rate across the country is as low as 10%, even in low paid jobs. Employers must not be seen to coerce an employee to opt out and the financial penalties for not abiding by the rules are punitive.
So when a year before your staging date, the letter from the Pensions Regulator drops through your letter box, it is time to project manage the large workload heading your way with potentially 50-100 man hours needed. Before then, you may want to read up to prepare yourself on the Regulators website http://www.thepensionsregulator.gov.uk/employers . You can also establish your own staging date if you have your PAYE tax reference number handy. Alternatively, contact a financial adviser to find out more and consider your own company budgeting to ensure a 3-4% of salary employer pension contribution is affordable.
This is something businesses cannot ignore regardless of size. There are a range of solutions including doing it yourself by setting up your own scheme, or using professionals to assist you in the set up.