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Employer pension contributions under the auto-enrolment scheme doubled to 2% of an employee's salary in 2018, and this year they'll be increasing again to a minimum of 3%.
The auto-enrolment scheme came into force in 2012, aiming to bolster retirement savings by making it compulsory for employers to register all UK workers aged between 22 and the state pension age - and earning more than £10,000 - into a workplace pension scheme. Staff must also contribute, although they're permitted to opt out of the scheme altogether.
Since the initiative began in 2012, nearly 800,000 employers have set up a pension scheme, and around 8.5 million employees are now saving for their retirement.
Employers should factor the new increases into their business plans in order to offset this added burden on company finances.
Organising and administering these auto-enrolment schemes can be a complex and time-consuming process for employers. But it's important for businesses to adhere to the rules as failure to comply can lead to a £400 fine plus penalties of £2,500 per day of non-compliance, depending on how many people are on the payroll. From the start of the scheme to September 2017 the total sum issued in fines was more than £27 million.
Another update employers should be aware of is re-enrolment. Three years on from the employer's original staging date (start of the scheme), the employer must re-enrol any eligible employee who has previously opted out, unless they opted out within the last 12 months. A declaration of re-enrolment must be completed within five months of the three-year anniversary of the original staging date.
Payroll is at the heart of auto-enrolment and it pays to ensure an efficient process is in place to make sure the scheme is fully integrated with the company's software systems.
We're here to help! Here at AMR, our team of experienced payroll advisers can address any worries you may have about auto-enrolment, and we can help guide you through the process from initial set-up to ongoing management. We've also teamed up with auto-enrolment specialists The Pension Counter to provide a fully comprehensive service.
If you require more information about AMR or any of our client services, do give us a call on 01892 559480, or get in touch via our online enquiry form here.