Auto-enrolment has been introduced to ensure everyone in the UK has made some provision for retirement; every employer has to offer a workplace pension and make regular contributions - even if they employ just one person.

As an employer you are responsible for selecting a suitable pension scheme for your employees. In order to comply with your legal obligations you must choose a scheme that meets the qualifying rules and, is prepared to accept your workforce. Not all qualifying pensions are the same and some will be better for your employees than others.

Read on to learn how you can protect your business should your employees challenge your pension scheme choice?

By April 2019 you’ll be contributing 8% of an employee’s pay into your chosen scheme and for many this is likely to grow to one of the largest assets they have. Employers failing to select an appropriate scheme for their employees could potentially be walking into a nightmare situation for their business in years to come.

Experts recommend that you exercise care in your selection, reviewing all available options and recording your attempts at finding the most appropriate solution. Review the market and compare annual management charges, scheme restrictions, types of investment options offered AND make sure you have it all written down to justify your choice.

The results of non-compliance

A recent report from The Regulator has highlighted a high street footwear firm that turned a £400 fixed penalty notice into a bill for more than £42,000 after claiming it was too busy to meet its pension responsibilities.

The company had been required to check whether its staff qualified to be put into a workplace pension scheme and to confirm to TPR that it had done so. Although the company paid the £400 fine it still did not become compliant. Despite repeated reminders – and being warned that it would face a new fine that would increase by £2,500 per day if it did not meet its responsibilities.

The fine reached £40,000 before the company finally became compliant. At that point, they refused to pay the fine – forcing TPR to take the business to court to secure payment.

The case has prompted a fresh warning not to ignore your auto-enrolment duties.

Fulfilling your duties

While you can carry out auto-enrolment tasks yourself, you may choose to seek specialist support. What you pay and the amount of time you spend setting up auto-enrolment will depend on various factors, including how you run your payroll and which solution you choose. There's a higher risk of paying more if you miss your staging date, so make sure you prepare early to avoid unnecessary costs.

Using payroll services

Whether you or someone else manages your payroll, you need to find out which auto-enrolment tasks the system can help you with and whether it provides all the information that your scheme provider needs. Find out if it is compatible with auto-enrolment, if not, you may face increased costs to ensure it is.

If payroll is run by your accountant or bookkeeper you’ll need to check if they will include auto-enrolment in their current charges or if you need to pay extra. Remember, payroll services may not fulfill all your auto-enrolment employer obligations so make sure you are clear about who is performing which duty.

TPR issued more than 4,673 fixed penalty notices of £400 for auto-enrolment non-compliance to employers in the first three months of 2017, up from 2,919 the previous quarter – the largest total issued to date.

Should I just use NEST?

NEST should not be considered as your default choice. It does provide a suitable choice for some, but not necessarily all employees; the charging structure means that some employees may be paying higher charges than with other available schemes.

NEST also has a number of restrictions on contributions and transfers which may not be suitable for all, and unlike most other options, if members die before taking their pension then the funds may be taxed.

Although currently free of charge to employers, there is no certainty it will remain this way, and whilst NEST meets the statutory obligation to provide a qualifying scheme you will still have to demonstrate why it was selected as the most appropriate choice and how it compared to other options available.

If this all sounds like too much work and you just want to focus on your business, why not discuss your options with an expert. Don't ignore your duties and ensure you comply.

www.johnsonfleming.com/AutoEnrolment