A record number of people are using workplace pension schemes thanks to auto enrolment. Introduced in numerous stages since 2012, the auto enrolment scheme recently increased its cap to 5% from April 2018 and is set to increase to 8% in April 2019.
While it’s great news that more employees are starting to save towards their pensions, it has placed a significant amount of pressure onto UK businesses.
Understanding the auto enrolment scheme
Auto enrolment was introduced by the Government back in 2012 in an effort to get more people saving towards their pension. Now, employers have a legal obligation to automatically enrol their eligible employees onto the company pension scheme. The employee can choose to opt out, but the employer has a duty to auto enrol employees every three years if they aren’t already part of the workplace pension.
Since April 2018, the minimum cap has increased to 5%, with 3% paid into the scheme by the employee and 2% paid in by the employer. As of April 2019, this will further increase to 8%, with 5% provided by the employee and 3% provided by the employer.
Eligible employees fall into the below categories:
• Those who are not already enrolled in a company pension
• Aged 22 years or older
• Earn over £10,000 a year
• Work within the UK
It’s worth noting that employees who earn over £6,032 but less than £10,000 can still ask to be enrolled in the pension scheme. If they do ask, employers have a legal responsibility to enrol them manually.
Why are businesses struggling to keep up?
The changes in auto enrolment have given businesses a lot more to do in order to ensure they meet the legal guidelines. It is thought that the auto enrolment scheme has brought in 10 million new savers.
Larger businesses have found it especially tough to keep on track of employee pensions. HR departments are already pushed to their limits, leaving little time to deal with the pressures of auto enrolment. Also, high-earning employees typically have more complex needs than lower earners, something which many businesses are unable to meet alone. That’s where financial and pension advisors come in useful.
More advisors required to meet demand
In order to meet increased demand, more independent pension advisors are required. Companies such as Hymans Robertson, can help to ease the pressure on businesses, providing expert advice and solutions.
Despite record numbers of employees now enrolled in a workplace pension, many are still unaware of their options. There’s a specific need for employers to help their employees understand auto enrolment and the benefits it delivers. However, many simply don’t have the time or resources to do it. Enlisting the help of a pension advisor can help free up time and ensure employees fully understand their options.
Overall, businesses are struggling to keep up with pension auto enrolments. As they are frequently changing, it is crucial companies keep up with the new legal requirements and help their employees to navigate through the auto enrolment process and its benefits. Hiring an independent pension advisor can help to ease the strain and eliminate some of the pressure businesses are currently under.
