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Is Your Business Prepared For Auto Enrolment?

Contributed by HW Fisher
25 September, 2014


Is Your Business Prepared For Auto Enrolment?

When the Government announced its new auto enrolment initiative a couple of years ago there was a mixed response from the business community. Although the growing problems surrounding pensions and retirement saving for a rapidly ageing population is a concern for all, many businesses felt concern over how the scheme would be implemented and the impacts it might have on them.

But now, as auto enrolment is becoming a reality for more and more businesses, people are beginning to see this as a positive scheme both for employees and employers.

 

Why Auto Enrolment Is Required?

Many people, especially among the younger generation of workers, are not saving for their retirement at all, and will be forced to rely on the basic State Pension in their twilight years. The expense of providing even this small amount of money is becoming so costly that the pension age has recently been increased, and even then it was obvious that the cost of additional benefits to help pensioners was going to quickly spiral into the billions.

The reasons for the lack of saving are complex. For some it's simply a case that the cost of living versus their wages means that it's almost impossible to save, for others it's simply lower on their priority list even though they know they should be saving.

Auto enrolment is a way to address these problems, by introducing what is close to compulsory private pension provision, with the option to opt out should you wish.

 

Your Role In Auto Enrolment

Not only will companies have to enrol staff and also make a minimum employer contribution (though forward thinking companies may well decide to exceed this minimum as an incentive for staff to stick with the company long term), but it will also be your place to encourage staff not to opt out of auto enrolment.

People can choose not to be part of the scheme, and with people under financial pressure after a bleak few years since the financial crisis of 2008, many may see their employee contribution of 4% as money they can't spare. It's important to stress to those that are on the fence or wish to opt out that it is a saving for their future and that it is bolstered by a minimum 3% employer contribution as well as 1% in Income Tax relief. So in effect auto enrolment can be viewed as a pay increase.

Looked at in the right way, auto enrolment should be viewed as a benefit for both staff and employer. Most staff are aware of the need for retirement saving, and this takes a lot of the weight off their shoulders. From the employer's perspective the scheme should encourage staff loyalty if approached in a forward thinking manner, as it will encourage staff to stick with the company and let their pension pot grow.

If you're concerned about auto enrolment, and how best to approach it, HW Fisher can help you.




 


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