Since October 2012, legislation states that every employer must automatically enrol their workers into the workplace pension scheme, if they meet certain criteria.
Employees will automatically be registered if they:
- are aged 22 to state pension age
- work in the UK
- earn over £10,000 a year
Starting dates for businesses have been introduced, enabling companies enough time to enrol their employees and to have a clear understanding of the ongoing responsibility they will undertake. However, over the next two years, The Pensions Regulator estimates that around 1.8 million small businesses will need to act fast in order to meet their pension duties.
If businesses fail to comply with their staging date, enforcement action through statutory notices and penalty notices will be introduced – which could contribute significantly to their cash flow. Typically, a penalty notice’s daily rate is £50 to £10,000 depending on the amount of employees within the business.
Executive director of automatic enrolment Charles Counsell said: "The challenge of ensuring 1.8 million employers meet their duties by 2018 is significant and the research shows many employers are still not preparing early enough. My message to employers remains clear: start getting your plans in place or you risk a financial penalty".
For many, the introduction of pension duties will have an impact on time and resources and it is evident that many simply do not understand what it is they need to do in order to complete the necessary enrolment. The survey suggests that 68% intend to use an accountant or an IFA to assist them in the process, an increase from 55% in 2014.