Come 2017, every UK business that employs staff will be required by law to offer and contribute to workplace pensions – including new and small businesses. This is big (and possibly daunting) news for many SMEs, especially considering the difficulties faced by many in the current economy. However the rule change follows numerous measures to aid small businesses such as urging banks to lend to small businesses and the new employment allowance, and politicians predict that it will benefit millions of workers who are currently lacking a stable pension plan.
The scheme applies for all employees between the ages of 22 and state pension age that are earning at least 10,000, though this amount will be reviewed every year and has already increased since the scheme began for larger businesses back in 2012. Businesses will be enrolled gradually, with each company’s start date depending on the size of the payroll. Until the end of 2017, the total minimum contribution for each employee will be 2% of the worker’s basic pay – 1% from the employer, 0.8% from the employee and 0.2% from the government – to ease small or struggling businesses into the new scheme, however by October 2018, this will have risen to 8%, with 3% of that amount coming from the employer.
2017 may seem like the distant future, but it is important to remember that the new scheme may significantly alter your monthly outgoing costs. While the scheme has numerous benefits including a reduced National Insurance bill and a proven increase of staff loyalty, there’s a chance that your finances may take a hit if you don’t begin to prepare soon. As a first step, we recommend visiting the Pensions Regulator website and using their staging date calculator tool to work out when your small business will be enrolled.
The first small businesses will be automatically enrolled in the new pension scheme in 2015, with all existing UK businesses to be enrolled by April 2017. Then it’s time to start looking at your budget, calculating how many employees you will expect to have by that date, and consequently how much you will be paying into their pension schemes, as well as researching different pension schemes.
Be sure to bear in mind that employees do have the option of opting out of the scheme, and experts predict that 15% of workers will decide to do so, however there is no guarantee that none or all of your employees will choose this option.
When considering how these changes will affect your budget or which pension scheme is right for your business, we recommend contacting and experienced and qualified chartered accountant. At MCC, we specialise in helping SMEs and start-ups, so whether you’re a shop owner, hairdresser, restaurateur or taxi driver, we can lend a hand. We can lay out simply how these changes will affect your budget, discuss your best option when it comes to choosing a pension scheme, and even help you plan some financial changes leading up to your staging date. If you’re looking for a team of helpful small business accountants in Greater Manchester, contact us today on 0161 707 1500 or through our contact form.