Workplace pensions: What every SME owner needs to know

Automatic enrolment launched on October 1, 2012 and affected the largest employers in the UK first. NEST is currently working with over 840,000 members and 2,900 employers, including many household name employers such as BT, McDonalds and Travelodge.

But the hard work is only just beginning. Over the next few years more than 1.2 million employers will enrol up to nine million workers into a pension scheme, many with limited experiences of pensions. Where do businesses start

A good starting point is to understand your “staging date” and work back from that. Your staging date is the date by which you need to comply with the duties and is based on the number of employees on your PAYE scheme.

You can find out your staging date on the Pensions Regulators website, along with other guidance on the rules.

Who do businesses need to enrol

You will need to enrol all eligible workers who are not already in a qualifying scheme.

An eligible worker is:

  • Aged between 22 and the State Pension Age
  • Working in UK
  • Earning above 9,440 (this figure will increase to 10,000 from April 2014)
Other types of workers can ask to be enrolled and you may need to make contributions for them too.

Assessing your workforce is one of the first steps youll need to take. You will also need to consider what scheme or schemes you will use to meet the automatic enrolment requirements.

Our advice is not to assume that your existing pension provider, if you have one, will be able to help all of your workers. Start a conversation with them early on to see what they can do. NEST has a public service obligation to be open to any employer which means that NEST can work with every employer of any size or structure to help them meet their duties, and won’t turn you away.

If that all sounds a bit daunting, dont despair! There is lots of advice and guidance available to you.

You can find our more at the Pension Regulators website and NEST has a suite of tools and guides on the NEST website which can help you navigate your way through what you need to do and you can sign up to NESTs countdown emails which remind you about the kinds of things you need to be doing. They start about six months ahead of your staging date.

How much do I have to contribute

Minimum contributions will start at 2 per cent of qualifying earnings from 2012, of which the employer must contribute 1 per cent; then theyll rise gradually over the next few years to a total minimum contribution of 8 per cent of which employers will have to put in a minimum contribution of 3 per cent of those earnings.

What do I need to tell my workers

Your workers will need to be told about the changes in writing, either by paper or email.

The information you need to tell your workers is set out in legislation and includes details of the pension scheme you use and the contributions for your workers, as well as where your workers can go for more information. NEST has templates you can use, both to meet your legal requirements and materials to help your workers understand how the changes will affect them.

Pensions are often seen as confusing and research suggests many workers lack confidence about workplace pensions, which may mean more questions for you as an employer. If you communicate ahead of the changes, in clear language, you’re likely to reduce the number of queries from your workers.

How long does it take to prepare

If your staging date is over a year away it can be tempting to push it to the bottom of your to-do list. However, many employers are underestimating how long it can take to get the implementation of automatic enrolment right.

It can take between six and 18 months to get ready, depending on the size and complexity of your business.

As well as assessing your workforce and choosing a provider, you will want to decide on your contribution levels for different groups of workers and should ensure your payroll systems (if you have them) can manage pension payments every pay period. Whatever their size, the vast majority of employers will face similar decisions and activities.

Graham Vidler is director of communications and engagement at NEST.

Share this story

Send this to a friend