Auto-enrolment – getting it sorted is easier than you think…
Workplace Pension case study – manufacturing company with 64 staff
This client is a Sheffield-based manufacturing company, with approximately two-thirds of the employees being weekly-paid, manual workers. When we first met, the company had a Stakeholder pension scheme in place, but none of the employees had joined.
The company’s staging date for pensions auto-enrolment is not until November 2014. When we met, the directors were aware of auto-enrolment, but did not fully understand the legislation and had not made any decisions about how to implement it within the company. They felt at outset that there would be almost no interest for pensions amongst the workforce.
What we did
Firstly, we made sure that the directors understood the requirements of the legislation and helped them put together a plan to make sure that they would be able to meet their auto-enrolment duties on time.
We then spent time on site, carrying out a number of presentations to staff. This meant that people had a better understanding of pensions generally; and what would happen when auto-enrolment comes into force for the company in November.
With feedback from the presentations, we found out that 11 people were already contributing to their own pensions and that a similar number would be interested in joining a scheme right away. We therefore looked for a suitable scheme that could be introduced immediately, that the company could also use for auto-enrolment later in the year.
The new scheme
The employer is not required to pay contributions until their staging date in November, but employees are free to join the scheme immediately and pay personal contributions. The level of contributions from interested staff meant that we were able to negotiate favourable terms from a mainstream pension provider, with low charges and a good range of investment funds.
We also introduced a salary-exchange arrangement alongside the new pension scheme, so that both the company and any members save National Insurance on any personal contributions that are made.
The scheme was launched to staff using a combination of printed literature and workplace seminars.
Resulting take-up and employer’s NI savings
26 people joined the scheme at outset, with total personal contributions of approximately £2,400 pm between all the members. These are being paid via salary exchange, which increases their personal tax-savings and also means that that the employer is saving £330 pm in reduced National Insurance costs.
Importantly, the company is comfortably on track with the implementation of auto-enrolment; and the employees are now fully aware of the legislation and can start to decide what they will do when it comes into force in November.