OpinionJan 29 2016

Don’t panic about workplace pensions

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Don’t panic about workplace pensions
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There are now some five and a half million employees enrolled into work-based pension schemes by their employer under auto enrolment.

First lauded as a ‘quiet revolution’, the shake-up to pension legislation is the government’s master plan for filling Britain’s pensions black hole and encouraging people to better save for their future.

However, things will not be so ‘quiet’ for small businesses in the coming months.

With up to 1.8m small firms required to assess and enrol their workers by 2018, small and medium businesses across the UK are braced for its fast-approaching introduction.

For the majority, it will be the first time they will have offered a workplace pension scheme and therefore represents a fundamental change and potential administrative headache, not to mention the contribution costs.

More encouraging for business owners was the chancellor’s decision to align the step-up in pension contributions with the tax year, as announced in the recent spending review.

The six-month delay means the statuary contribution rises to 2 per cent for employers will now be in line with the tax year, in the process saving the government £840m by 2019.

Pushing back the step-up in pension contributions and aligning to the tax year is not only good news for public finances, but has been applauded by employers.

It stands to make it easier for employees to plan their retirement savings for the year ahead, but will also enable employers to better plan for the administrative pressures brought about by auto-enrolment.

There is no reason for business owners to panic if their staging date is on the horizon

With The Pensions Regulator revealing that just 29 per cent of small businesses are fully aware of the date they are supposed to stage, it is clear auto enrolment is shrouded in some confusion.

This has been further exacerbated by rumours that the Department for Work and Pensions could delay its roll-out.

Yet there is no reason for business owners to panic if their staging date is on the horizon.

With the technology and support that exists today, small businesses don’t need to be lumbered with the added burden.

Ideally, businesses should start to prepare for auto-enrolment at least six months to a year before their staging date, to ensure the right business processes and technology are in place.

Software can do much of the heavy lifting through payroll and pensions administration solutions, but these are two separate business processes, creating twice the work for the employer.

Success for a business is being able to bring pensions and payroll into one entity. The magic happens when the two integrate so seamlessly the payroll process does not miss a beat, turning a very complicated process into something very simple.

New tools allow customers to swiftly assess their work force, enrol them into an approved scheme and then send relevant pensions data directly to their pension’s provider with one click – dramatically reducing the administrative burden, overheads and errors associated with auto-enrolment.

Legislative change, although painful, is nothing new. The crucial part of this legislative puzzle is preparing early.

Just because the chancellor has delayed statutory contribution rises, businesses still have to meet their initial staging dates and so they should not take their foot off the pedal when it comes to auto-enrolment planning.

As well as taking away the headache of added administration, this will help keep the cost of implementing auto-enrolment to a minimum.

Firms will not have to fork out for potentially costly and ineffective middleware and there are savings to be made in staff time because the process is so streamlined.

Auto-enrolment doesn’t have to be a strenuous process.

The pension industry is working towards an automated future and there is a substantial amount of planning and investment within it.

With early preparation, good guidance and use of highly competent payroll software, the process can be painless and effectively managed.

Kevin Hart is head of strategic alliances at Sage UK