Published on September 22nd, 2014 | by admin0
Are You Ready For Pension Auto-enrolment?
Mention of the word ‘pension’ tends to be greeted with immense apathy. Figures as recently as 2012 from the Office for National Statistics revealed that almost half of employees below retirement age did not have any private pension savings at all.
This is why the government has put plans in place for everyone in the world of work aged 22 or over earning more than £10,000 a year during the 2014/15 tax year to have one by 2017.
Auto-enrolment started in October 2012 when four million employees working for the biggest firms were entered into workplace pension schemes for the first time.
As time goes on, staff at smaller firms will all gradually be entered into a scheme which means even small business owners will need to familiarise themselves with their obligations sooner rather than later.
The actual specific deadline date of when a small business needs to adopt the new pension ruling depends upon when the entity was created. The first small businesses which will have to provide a workplace pension next year are those which were set up before 2012.
With calculators at the ready and looking at the specific figures involved, until the end of September 2017, employees must make a minimum contribution of 2% of basic pay which will be made up of 1% from the employer, 0.8% from the employee and a further 0.2% government tax relief.
However these figures alter in 2018 with the minimum employer contribution then set at 3%, with 4% coming from the employee and the remaining 1% in the form of government tax relief.
The exact date that a small business will need to enroll will be dictated by their payroll size so making reference to the company wages book and having a clear grasp on this form of overheads is vital. The Pensions Regulator is a very handy resource in this regard in order to ascertain the precise staging date for a small business.
Employee’s contributions to this mandatory pension scheme will be deducted from their gross earnings meaning a firm’s National Insurance bill will be lower. So whilst budgeting to create a pension slush fund is imperative for small businesses to consider, it need not be as onerous as first perceived.