Yorkshire businesses employing less than 30 staff could risk fines starting at £400 if they fail to be ready by June 1 to comply with the government’s auto-enrolment pension regulations.
Barry Warne, partner and head of employment law at hlw Keeble Hawson, and independent financial adviser Erica Dietsch at Hawsons Wealth Management Limited, are warning regional SMEs that ignorance of the scheme could prove costly.
Designed to encourage 10 million employees to save towards their retirement, the regulations require employers to enrol staff onto the scheme and contribute towards their pensions.
The initiative has been rolled out in stages based on the size of a company’s workforce, with smaller businesses featuring in the next tranche. Firms affected will have received a letter from the Pensions Regulator, sent 12 months ahead of the due start date, advising them of the required course of action.
Erica Dietsch said: “Some pensions experts have suggested that SMEs have put off auto enrolment planning until after the General Election.
“Such delays present a financial risk as the Pension Regulator is clamping down on businesses who fail to comply and will be keeping a watchful eye on the 25,000 companies due to auto-enrol their employees this year.”
Barry Warne said: “SMEs should already be planning ahead for their ‘staging date’ and collating all the necessary paperwork to complete their declaration of compliance. They should check with pension providers whether existing pensions for any employees will qualify for auto-enrolment as some may not.”
From October to December 2014, the regulator issued 166 fines of £400 and 1,139 compliance notices to firms who were found to have been in breach.
Compulsory employer contributions are the main costs associated with the pension scheme, with businesses required to pay a minimum 1% for everyone they automatically enrol and anyone who opts in – rising to 3% dependent upon employees’ qualifying earnings.
Companies also need to be aware that pension solutions are not necessarily free and that some of the large insurance companies will charge employers a service fee to manage their pension scheme.
The Pensions Regulator lists the ‘staging dates’ for the legislation and provides a step by step online guide to preparing for compliance on their website: www.thepensionsregulator.gov.uk/employers/planning-for-automatic-enrolment.aspx