Malcolm Streatfield explains why Scottish charities need to plan well ahead of their auto-enrolment date
Over the next four years, 1.6 million mainly small and medium-sized businesses representing 9.3 million employees will need to set up pension schemes by law, most for the first time.
Many charities in Scotland will reach their staging date to enrol staff into a pension scheme this month, as the government’s auto-enrolment implementation gathers pace. But charities in Scotland should ensure their qualifying scheme is set up well in advance or they could face daily fines of up to £2,500 if they miss their allotted date.
From April this year those businesses with 50 to 249 employees began the enrolment process, with staging dates stretching out until April next year, but with big peaks in July, August and November. Then, in a year’s time, from August 2015, tens of thousands more firms with 30 to 49 employees will start paying in for the first time and should start their planning now. 2016 will see 512,000 organisations caught up for the first time and another 661,000 in 2017.
It is really important to engage early and make a virtue of the need to make pension provision, which can be positioned as a highly attractive feature for existing and prospective employees
The auto-enrolment pension reform requires all employers to enrol eligible job holders in a pension scheme automatically, and to pay mandatory minimum contributions for those employees.
At the Lighthouse Group, though, we are finding that organisations are leaving it too late to start the auto-enrolment process. Many have simply not factored in the length of time it takes to gather the correct personal data of employees and get their payroll systems in to shape, which is a mandatory requirement to begin the process.
It is really important to engage early and make a virtue of the need to make pension provision, which can be positioned as a highly attractive feature for existing and prospective employees. Starting early will mitigate the risks of making mistakes and then getting fined as a result, while also helping with the budgeting process and avoiding any capacity problems.
Lighthouse Group is the UK’s largest autonomous national firm of financial advisers. We have launched a pension’s master trust specifically designed to help SMEs, including charities, planning their pension roll-out and save them from the challenges of assessing and categorising workers, adapting payroll systems and communicating the changes to workers.
We have trained up over 200 local advisers to help organisations with planning their preparation, including HR and payroll administration, handling the employer’s communication programme, scheme registration, and ensuring full compliance. Our pensions master trust apps for advisers, employers and members are a ground-breaking development, helping promote member engagement, transparency and accessibility.
The Lighthouse Pensions Trust also benefits from the highest standards of governance, with independent trustees, and an innovative age-profiled range of default funds.
Charities should realise that, as long as they are in business, they will be contributing an ever increasing amount into the pension scheme with compulsory phased increases already set for 2017 and again in 2018. So charities should spend time upfront now to do their research and make sure their pension scheme is fit for purpose, that it's set up properly and that they fully understand how it works and operates. Being an early adopter makes good business sense.
Smaller firms, with fewer than 30 employees, are due to start auto enrolment from November 2015. By 2018 the Department for Work and Pensions estimates there will be between six and nine million people newly saving into pensions through auto-enrolment schemes with current assets of £400 billion to double in the next 15 years.
Malcolm Streatfield is chief executive of the Lighthouse Group.