Monthly Archives: June 2014

Our 2014 Investment Action Plan – Part 7 – Auto Enrolment

The end of 2012 saw the introduction of the government’s flagship Auto Enrolment pension legislation. The aim of Auto Enrolment is to require employers to set up a pension scheme for their employees and for them to make a specified minimum level of contributions. The government hopes that this will start to create a turnaround in the seemingly ever- decreasing levels of pension saving in the UK.

Auto Enrolment requires all “eligible jobholders” to be enrolled into a qualifying pension scheme either on
or before a company’s “staging date”. The staging date is the deadline for complying with the new legislation and will vary depending on the amount 
of employees in the business and in some cases that employers PAYE reference number. Larger employers (who have over 500 employees) had staging dates towards the end of 2012 and throughout 2013. These larger employers generally have specialist HR and pensions departments to help them qualify with the rules and in many cases they will have had a suitable pension scheme in place anyway.

2014 is the year in which small and medium size business will begin to be affected by Auto Enrolment. In January employers with between 499 and 350 employees will have to comply and by October, those with as few as 60 employees.

In many cases these smaller businesses will have much more work to do than some of their larger counterparts. For starters, many smaller employers do not currently have a formal pension scheme in place. Although previous legislation has required all employers to designate a stakeholder pension scheme, the absence of employer contributions means that in many cases these are nothing more than an empty shell. Auto Enrolment will therefore see many employers dealing with the implementation of a pension scheme for the first time.

Smaller businesses will also need to get to grips with the categorisation of workers, making sure that their payroll software is suitable and also ensuring that they maintain compliance on an on-going basis. Add in the communication requirements, the categorisation of part time workers, sometimes on a monthly basis and the need to ensure that the scheme offers suitable investments and it is clear that Auto Enrolment can be a very time consuming and costly exercise.

The penalties for non-compliance are severe, and in some cases are up to £10,000 per day. Suffice to say, most smaller employers can ill afford these types of fines.

If you are an employer or business owner, it is recommended that you begin to plan for Auto Enrolment at least 6 months before your staging date. A planning window of a year or more would be ideal. A Chartered Financial Planner or Employee Benefits Specialist will be able to help your business comply with the legislation and will also free up your time to focus on your business.

While some employers will simply want to comply with the legislation with the minimum cost and hassle, others will see Auto Enrolment as an opportunity to engage with their employees, and use the newly formed pension scheme as part of a wider employee benefits package to increase employee retention and job satisfaction.

Our 2014 Investment Action Plan – Part 6 – Formulate a Comprehensive Financial Plan

We all have different financial and lifestyle goals, however many of us are unsure as to exactly how or when these objectives might be achieved. Whether you aspire to retire early or to fund a new business venture, by creating a comprehensive cash-flow model you are able to predict how close your existing provisions will come to achieving your objectives.

In addition to looking at the intended course of action, a good cash-flow model should also consider some “what if” scenarios such as the illness of a family member. This exercise is often eye opening and can show you how well prepared you are should the worst happen.

By putting in place a thorough cash-flow model, you can have a greater degree of certainty about your financial future and see how the different options available to you could impact on your plans.