Monday 25th February 2019

Heavy crackdown on Pension blunders

Small businesses hit hardest by Pensions Regulator.

 

A recent article on personnel today highlighted the dramatic increase in auto-enrolment fines from The Pension Regulator.

Up from 12.6m in 2016-17, last year’s Pension fines more than tripled to a painful £42m. The Pensions Act 2008 has brought about a heap of changes since it came into effect and good or bad, headlines have been heavy.

News that’s been everywhere, the latest in the world of UK Pensions is next month’s rise in contributions set for 6th April 2019. As last year proved, the penalty for getting it wrong has been no joke especially for smaller businesses that’ve been hit with massive fees. That in mind, if you’re a business owner uncertain about your company’s pension process, it’s more important than ever that you ask yourself whether you can afford to get it wrong.

 

Employer
minimum contribution
Employee
minimum contribution
Total
minimum contribution
April 6 2018 – April 5 2019

2%

3%

5%

April 6 2019 onwards

3%

5%

8%

What became apparent in the months following April 2017, when the auto-enrolment scheme was rolled out to the small business sector for the first time, was the knowledge gaps in the SME market that has coincided with the recent deluge of fines. Unlike large corporations that have greater access to resources to keep their firms compliant, many SMEs don’t have the necessary in-house HR capabilities and are therefore at more risk of making errors over the coming months.

Ahead of the next phase in the auto-enrolment roll out, we’ve put together a few key tips to help keep your company, big or small, in the black with The Pensions Regulator.

 

Step 1: What is auto-enrolment?

“Automatic enrolment is a Government initiative to help more people save for later life through a pension scheme at work” – Pensions advisory service

 

It’s a term that’s had its fair share of spotlight in UK news, but what is it? Basically a scheme set up by the government, auto-enrolment is what helps employees set money aside for the future. Initially coming into effect in October 2012, the government project has been rolled out in phases ever since and asks a minimum contribution from both employer and employee in order to bump up each employee’s retirement pot.

One of the concerns that prompted the Auto-enrolment scheme was that many Brits weren’t giving retirement planning a serious thought until later in life, which was not soon enough to guarantee financial security. A worrying figure that was knocking about at the time… the government estimates showed as many as 7 million people saving too shy an amount, or not at all. Paired with higher life expectancy, it was a statistic that couldn’t continue to be swept aside.

For the Brits that were putting money aside, there was the concern that the Pension system of the time was simply not up to scratch. Because auto-enrolment makes it compulsory for employers to offer eligible workers a workplace pension, and for employers to pay into it, the incentive for employees to give their retirement plan a serious thought is greater.

So, eligible workers? There are a few factors that come into play. A UK-based employee will be auto-enrolled into their work’s pension scheme if they:

  • Aren’t already in a qualifying workplace scheme
  • Are at least 22 years old and below state pension age
  • Earn more than £10,000 a year in 2018/19

 

Step 2: Keeping your staff engaged with their pension

 

Making sure your staff are switched on to their pension plan is one of the key duties of a business owner or leader within an organisation. It’s part and parcel with keeping their financial welfare in check, and keeping their worries at bay in regards to their retirement security.

Switched on doesn’t simply mean that they are enrolled into any old scheme, but that they are enrolled into a decent pension plan that not only offers them an attractive means of saving, but that keeps them in-the-know with how the scheme itself operates. You’d be hard-pressed to find a working adult that doesn’t know what a pension is, as a basic concept, but understanding exactly how their particular scheme operates – it’s surprising how many employees feel completely out of the loop.

This is not intended to be a sales pitch, but simply a push for employers to take stock of the staff they have on board and ask the question:

do you understand what’s going on with your pension?…

And providing there’s not a pained series of umming and erring, you’re probably on the right track.

If you feel your company Pension policy could be doing better, we are happy to give you a free consultation to help you iron out the creases. Learn more about our scheme here or give our team a call on 0113 340 3116 if you’d rather a chat.

 

Step 3: What Growth Partners will do

 

Our Growth Pro Pension portal is tried and tested alongside engagement rates to ensure it not only offers employees personalised schemes, but is also user-friendly and helpful. Our dedicated Pension team keeps them up to speed with what is actually happening with the (soon-to-be minimum 5%) contribution they are putting aside, and gives them an easy digital app that lets them track their savings.

We get it, for employees it’s easy to push your Pension plan to the back of your mind, a thought for later in life, but as business leaders it’s important that when your employees are after information about their scheme, there is either someone at hand or a system in place that can answer their questions. With Growth Pro, your employees pensions will be secure, and accessible to them at the click of a button. Stored in the same spot as their Payslips, they can just as easily keep an eye on their Pensions as they can their wage.

Not only is Growth Pro there to make your employees’ lives easier, but it also operates under the SMART Employment model that is in place to keep your company in the black with The Pensions Regulator.

 

Step 4: Keeping your company compliant

 

Ahead of this April’s contribution increase, we are helping SMEs polish up their Pensions process with SMART Employment. What is it? If you’re not already familiar, SMART Employment offers companies expert business support, allowing them to operate with greater legal security. With last year proving a tough year for small businesses, the worry is that over the coming months firms that aren’t 100% clear on their pension process are at risk of being fined.

Larger firms have the luxury of in-house HR teams or paid accountants who manage their Pension calculations, but for SMEs the cost of additional hires makes it tempting to just run the maths yourself. SMART Employment is the affordable alternative to keep your company in the clear.

SMART Employment comes with many benefits, and the big one is that we shoulder the risk. With traditional outsourcing, sometimes employers worry because if anything goes wrong the fine is sure to land at their door.

The great thing with SMART Employment is that one: the employer keeps full control of their company, but also two: we inherit a portion of employee responsibility along with the workload, and are legally accountable for any penalties or infractions should they occur.

 

If you’d like to learn more about the Growth Pro Pension service, click here.

Check out our Pensions Handbook April 2019 or speak to an expert on 0116 340 3116.