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Getting to grips with pension auto-enrolment

Businesses across the UK are enrolling staff into workplace pensions following Government changes. Over the next year many farms will be required to take this step. Experts share their tips on getting up to speed

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Many farm businesses will need to tackle auto-enrolment this year and experts have advised employers to prepare now to avoid costly mistakes when bringing in the new changes.


Both farm employers and workers are also being warned to prepare for the potential loss of immediate income this could create during a difficult time for the industry.


UK businesses are now required by law to enrol staff into a workplace pension.

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What is auto-enrolment?

Law changes on workplace pensions mean businesses with employees must enrol them in a suitable pension and contribute to this. The amount of contributions will rise in the coming years.

Thousands have already been required to do this and many small businesses, including those in the farm sector, will be required to in the coming year.


George Chichester, partner at Strutt and Parker, said: "[The staging date] depends on the number of employees. Companies with lots of employees would have already started down this route."


He said the next group to be affected would be smaller companies and these changes would occur over the next 12 months.


"Most of them will have to deal with this now. A farmer paying staff should have had a letter from [The Pensions Regulator] telling them their staging dates," he said.


The amount employers will have to contribute to such schemes will rise between now and 2018.

Auto enrolment timeline for employers

Staging dates for companies with 1-30 companies will be before April 2017. The Pensions Regulators' timeline advises employers to know their staging date and develop a plan.


Between now and staging

  • Assess workforce and develop a plan
  • Review pension arrangements
  • Communicate changes to workers

At staging and beyond

  • Automatically enrol eligible jobholders into pension scheme
  • Register with pensions regulator and keep records
  • Contribute to workers' pensions


Employers paying minimum contributions will be required to pay 1 per cent of an employers qualified earnings until September 2017. This will rise to 2 per cent to September 2018 before rising to 3 per cent.


Mr Chichester said farmers employing staff must plan for the cash flow impact of these contributions.


With farmers often operating as sole traders, Mr Chichester said many would not have offered pension schemes previously.


"You have got to think this is extra money," he said. "The employer will have to pay a contribution. It takes time to set these things up."


This was a theme underlined by Morten Nilsson of NOW: Pensions, he said: "For anyone who runs a small business, auto enrolment can feel daunting.


"Smaller employers tend to have little or no experience of pensions, they do not have the dedicated in-house resource that larger companies enjoy, nor do they necessarily have the support of an expert adviser. The key is to tackle it early and plan.”

Top tips for auto enrolment

NOW: Pensions’ top tips for small businesses tackling auto-enrolment

  • Include auto enrolment in budget forecasting The cost of implementation, planning, payroll modifications, assessment, communications and record-keeping will depend largely on the decisions an employer makes. By 2019, employers must pay a minimum of 3 per cent of qualifying earnings per employee into a pension scheme.
  • Think carefully about scheme selection Employers should take the time to consider their provider. For employers completely new to pensions, it may be wise to seek guidance from an expert adviser.
  • Think about your contribution structure The reality is auto-enrolment minimum contributions will not be enough for most people to be sure of a comfortable retirement.
  • Harness the power of payroll For auto-enrolment to run as smoothly as possible, your payroll system needs to have an automated exchange of data with your pension system.
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