MD of the 4dentists group, Richard T Lishman: "The latest developments in the automatic enrolment pension scheme"
Since being introduced in 2012, the automatic enrolment pension scheme has required employers to contribute a minimum of 1% to all staff members enrolled in a workplace pension, with employees required to at least match that contribution. As of 6th April, the minimum is 2% for employers and 3% for staff totalling a minimum contribution of 5%.
Though it’s been a while coming and the necessary preparations have no doubt already taken place, it may be worth reviewing your ongoing duties to ensure you’ve got everything covered. After all, it’s better to be safe than sorry – especially when failure to contribute to your staff pension scheme correctly or on time incurs a fine from the Pensions Regulator.
It’s also worth bearing in mind that there will be an additional increase effective from 6th April 2019 onwards to 3% for employers and 5% for employees. That date will soon come round, so be sure to notify all staff enrolled onto the scheme well in advance and arrange the contribution increase your end. For compliance and seamless staff contributions in your practice, here are a few top tips and areas to watch out for:
If your payroll is outsourced to an external provider, be sure to give them plenty of notice about what rate of contribution is due and when, as well as what earnings to use to calculate contributions. The most common way to calculate contributions is ‘qualifying earnings’, which is based on a percentage of a worker’s gross annual earnings between the current lower and upper limits.
The proposed qualifying earnings band for 2018/19 is £6,032 for the lower limit and £46,350 for the upper limit. If you’re calculating staff members’ qualifying earnings for a pay period yourself, you will need to include the following within your calculations: the individual’s salary, overtime, bonuses, commission, statutory sick pay, paternity and maternity, adoption pay and holiday pay.
For help with establishing the most suitable way of calculating contributions in your practice, contact an Independent Financial Adviser (IFA).
Monitor ages and earnings
Any part- or full-time employee above 22 years old earning more than £10,000 a year would have been automatically enrolled when your practice first started offering a workplace pension. However, as ages and earnings can change, it’s important to regularly check just in case you need to enrol someone new into your scheme – including new starters.
Anyone who qualifies must be signed up and written to within six weeks from the day they meet the age and earnings criteria.
If you have any staff that chose to opt out or leave your automatic enrolment workplace pension scheme, keep in mind that you’ll need to re-enrol all those that still meet the criteria approximately three years after your staging date. Naturally, you will need to inform the affected staff by letter that they have been re-enrolled, then should they choose to they can opt out again.
In the same way initial registration was a legal requirement, failure to re-enrol is a finable offence and must be followed to a tee.
Accurate and up to date record keeping is essential to achieving compliance and keeping on top of workplace pension contributions. Where there is a dispute these documents will come under scrutiny, so take care to ensure that the information is logged clearly and filed efficiently. Records should include:
• Staff gross earnings
• Staff and employer pension scheme contributions due to be paid
• All contributions and membership to date – and dates when money has been paid into the pension scheme
• The names and addresses of all staff members entered into the pension scheme
• Pension scheme reference or registry number
• Requests to join or leave the pension scheme
All records must be kept for six years as evidence, except requests to leave the pension scheme, which only need to be kept for four years.
If you need help ironing out any problems with the contributions increase or think that you may benefit from assistance with record keeping and payroll, contact the expert team of accountants and IFAs from the 4dentists group.
Workplace pensions are changing, with more now expected of you as an employer. By staying aware of recent developments and contribution increases, and diligently keeping on top of your responsibilities, pension payments to staff should be smooth sailing, now and long into the future.