Even at the best of times most people find pensions confusing.
Throw in a new type of pension, Automatic Enrolment, as well as the constant changes to the system and you have the potential for a lot of awkward questions coming in your direction.
If you have bought in an adviser to help you with Automatic Enrolment you will be able to divert some of the questions to them. Even if you have used an adviser, or if you’ve taken the DIY route, your staff are bound to have questions which they will expect you to answer.
Here are the seven most popular questions employers get from their staff; we’ve included the answers too!
#1: “When will it start to affect me?”
That all depends on your business’s Staging Date, which we can look up for you.
Simply give us a call on 0115 933 8433, ask to speak to one of the Automatic Enrolment team, and we’ll do the rest.
You can then tell your staff, allowing them to budget and plan.
#2: “Will I definitely be enrolled into the pension?”
No, not every employee will be enrolled, which might come as a surprise to both you and your staff.
Only workers aged between 22 and their State Pension Age (SPA) and who earn more than £10,000 per year, will be automatically enrolled. These people are called Eligible Jobholders.
Anyone, no matter how old they are, who earns between £5,772 and £10,000 per year is called a Non-Eligible Jobholder. These people can sign up to be automatically enrolled. If they do, both they and you as their employer, will have to pay into their pension.
People earning less than £5,772 per year can ask to join a pension, but you as their employer don’t have to pay in.
You can learn more about which of your staff will need to be enrolled into a pension by clicking here.
#3: “How much will I have to pay in?”
The contributions to Automatic Enrolment start off relatively low and then rise over the next few years.
Phase 1: Staging Date to October 2017: 2% total contribution, including a minimum of 1% from the employer
Phase 2: October 2017 to October 2018: 5% minimum contribution, including at least 2% from the employer
Phase 3: October 2018 onwards: 8% minimum contribution, including at least 3% from the employer
In practice this means most of your staff will pay in 1% of their gross (before tax pay) until 2017, 3% for the next year and then 5% thereafter.
#4: Can I pay more in or join sooner?
Some of your staff will see Automatic Enrolment as a way of kick-starting their retirement planning. After all, their employer will pay in for them, as will the taxman.
It’s perfectly allowable for a member of staff to pay more in than the minimum; in fact, most people would be advised to do so.
If one of your employees decides to pay more in, you are under no obligation to pay more yourself, although it could be a way of rewarding key employees, whilst making your business more attractive to new recruits.
There is no way your employees can force you to start a pension before your official Staging Date. However, if you elect to use ‘Postponement’, which delays your first contribution by three months, employees can ask for contributions to be backdated to the original Staging Date.
#5: “Can I avoid being enrolled?”
An Eligible Jobholder (which we defined in question two) cannot avoid being automatically enrolled; no matter how anti pensions they are, or whatever other excuses they come up with, they will be enrolled.
They do however have up to three months to opt out. If they choose to do this, money deducted from their wages will be refunded to them; which you, as their employer, will have to organise.
#6: “When can I retire and how much will I get?”
This is the question employers will find hardest to answer, as it specific to each employee.
When an employee is enrolled they will receive a personalise illustration showing what they could get in retirement. But there are so many factors, contribution levels, charges, investment returns, and retirement age, to name a few, which could change.
The best answer, although rather glib, is that your employees will have a more financially secure retirement by joining the pension, than if they opt out.
#7: “What do I do with my existing pension?”
This is relatively straightforward question to answer, because you probably can’t! That is of course unless you are a qualified and authorised financial adviser, which is probably unlikely.
It is however a very important question for any of your staff already paying into a pension.
If you are using a financial adviser to help you with Automatic Enrolment, this should be something they are willing to help your staff with. Otherwise you should suggest they find their own Independent Financial Adviser (IFA). This could be done by getting a recommendation from you, family or friends, or using an online directory such as www.unbiased.co.uk
Avoid the difficult questions
If you don’t feel equipped to deal with the inevitable questions your staff will have about Automatic Enrolment, we’re here to help.
We’ve developed a four stage process to make sure your business complies with the Automatic Enrolment rules. At the heart of this is communications with your staff, to ensure they know what’s happening and have all their questions answered.
If you would like to know more about how we can help your business, call on of our Automatic Enrolment team today on 0115 933 8433 or email info@investmentsense.co.uk
