What You Need to Know About Pensions as a Business Owner
If your employees are earning over £10,000 a year, you’re legally obliged as an employer to set up a pension scheme for them. Pensions are great ways for people to save for their retirement by putting a percentage of their wages into a pension scheme, and most employers also add to these savings by matching that amount. As a business owner, you must understand a few key points about pensions to make sure you’re meeting your obligation to support your employees.
Since 2017, businesses in the UK have had to automatically enroll employees into a pension scheme if they are over 22 years old and are earning more than £192 ($262) a week. Employees can choose to opt-out of these schemes if they wish, but they need to put that in writing and send a letter or email to you confirming this. Additionally, members of staff who did not qualify for automatic enrolment can still apply to join the scheme provided they are 16 years old and over, are earning over £10,000 ($13,645) a year or between £6,032 ($8,230) to £10,000 a year, or are over the state pension age of 74. They will also have to put their request to join your company’s pension scheme in writing.
You must inform your employees that you’re enrolling them into a pension scheme within six weeks from when you employed them. The pension provider you’re using as a business might be able to do this for you, but if not, you must make sure you’re sending out these notices yourself. Your letter should inform them of why they are being enrolled in a pension scheme and that they have the option to opt-out if they wish.
You’ll need to make sure that your payroll is set up correctly for all employees who are involved in a pension scheme. The payroll software your company uses should give you an option to include this. Look at using cloud payroll software, as often this is a smoother system that minimizes your HR team’s administration tasks when dealing with payroll. It should also make it easier to keep pension records and manage those contributions more effectively.
Another thing to consider as a business owner is organizing a pension plan for yourself. Look at setting up a Small Self-administered Scheme (SSAS) where you can make contributions to your pension savings. It’s a great way to give yourself peace of mind and perhaps even look at taking an early retirement if you wished to sell your business in the future.
As mentioned above, employees can write to you informing you of opting in or out of pension schemes. It is your responsibility as a business owner and employer that these requests are managed effectively. Make sure that your pension scheme provider is informed of these updates as soon as possible once you have received a request from an employee regarding their pension.
Pensions can provide a safety net for employees once they reach retirement age, and it’s a great way for them to put a little money aside each payday to help them prepare for the future. As a business owner, it’s your responsibility to make sure your employees are getting this opportunity.