Automatic Enrolment: 6 reasons why Auto Enrolment shouldn’t be treated like your tax-return

Give most of us a deadline to complete a task and we’ll naturally take as much time as we can to complete it.

This is true from our school days, when homework was completed at the last minute and exams crammed for, right through to our adult lives; just look at how many people leave their tax returns to the last minute.

Nearly all businesses have a deadline coming up over the next few months or years. Known as your Staging Date, this is the deadline for meeting your Automatic Enrolment obligations.

The Pensions Regulator suggests businesses leave 12 months to plan for Automatic Enrolment. But we know many employers are leaving far less time, only starting to think about Automatic Enrolment close to their Staging Date.

Given all the other calls on your time this is understandable, after all this is not why you went in to business in the first place, but leaving it late could create significant problems.

Reason #1: Incurring a penalty

The penalties for missing your Staging Date are potentially high.

You will initially be given a warning, which will be followed by a fixed penalty of £400. Not too severe so far, but then the penalties shoot up for those companies who still fail to comply.

If you employ between 50 and 249 employees the fine for on-going non-compliance is a whopping £2,500 per day. For businesses with fewer employees, between five and 49 the penalty is still £500 per day and even the smallest of businesses will be fined £50 per day.

For most businesses missing their Staging Date simply isn’t an option.

Reason #2: Too little time to get your employees on-board

All employees, aged at least 22 and earning above a certain level, will need to be automatically enrolled into a suitable pension. But the real success of Automatic Enrolment will be measured by the number who stay in the scheme and don’t opt-out.

Employers who care about the long term future of their staff, especially in retirement, will want to see opt-out rates as low as possible. This means engaging with your workforce to ensure they understand the importance of planning for retirement as well as how Automatic Enrolment will benefit them.

Giving your business sufficient time, not only to meet your Staging Date, but to also properly inform and engage with your workforce, will only benefit your staff in the future.

Reason #3: Running out of pension options

To state the obvious, to comply with the new regulations you will need to put a qualifying pension scheme in place. This might be a new scheme; alternatively it could be an existing scheme which you have changed to ensure it complies with the new regulations.

Either way, you and the pension provider will need time to make sure everything is completed by your Staging Date.

Many pension providers have imposed minimum time periods they need before they will consider an application.

The longer you leave it the fewer options you and your employees will have.

Reason #4: No time to find the support you need

If you plan to take the DIY route and do the work needed to comply yourself this isn’t a problem for you.

However, if you plan to bring in expert help, perhaps an Independent Financial Adviser or your Accountant, they need time to plan and implement this project properly.

If you leave it to the last minute you might find they can’t fit you in, or their charges rise due to the late notice.

If you will be using an adviser then we’d recommend making that decision sooner rather than later and let them start planning for you; it won’t cost you anymore!more and they’ll thank you for it!

Reason #5: Beware the unexpected

Things will always go wrong, delays will occur,  life throws us ‘curveballs’ and naturally, the day to day running of your business will take priority.

Leaving it to the last minute will give you no slack whatsoever; a good project plan always allows some spare time to cope with the unexpected.

Reason #6: Postponement doesn’t alter your Staging Date

If you are delaying because you think you can postpone by three months, think again, it doesn’t work like that!

Postponement only delays the date when you must start to make contributions; it doesn’t push back your Staging Date and all the necessary compliance and supporting paperwork that goes hand-in-hand with it.

You have to do this, so why not start planning now?

What will businesses gain from delaying? We believe the answer is nothing!

You will still have to meet your Staging Date and the cost in terms of time or fees to your adviser will be the same.

The consequences of delaying could be significant:

• A possible penalty if you miss your Staging Date
• Potentially less engaged employees
• Few pension providers to choose from, potentially giving your employees a worse deal
• Less support from your advisers
• Less time to cope with the unexpected events life always throws at us

We’d recommend starting to plan 12 months from your Staging Date. It won’t cost you anymore, in fact it might even save you money and it will mean you are more likely to hit your Staging Date in a more relaxed way, with an engaged and informed workforce.

We’re here to help

Automatic Enrolment isn’t going away, your Staging Date is getting closer and the time you have to plan is getting smaller.

Our team of Automatic Enrolment specialists are here to help, get in touch today on 0115 933 84330115 933 8433 or email info@investmentsense.co.uk