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Breaking News on Auto Enrolment

Auto enrolment has had a lot of press recently and even its own TV ad campaign, but many people, indeed many employers, are still unsure exactly what it is, let alone what it means for them.

It is of course all about pensions, and to get an understanding of the thought process behind it, it's worthwhile considering the context of pensions in the UK.

When occupational pensions became common place in the UK after the World War II, the majority of people worked their whole life for one employer, retired at 65 and died a few short years later. In such an environment pensions based on a percentage of their salary, commonly called Final Salary Schemes were the norm. Result – most pensioners had good retirement income and for those who did not the State Pension could pick up a lot of the slack.

The world we find ourselves in today is a very different place. Most employees work only for a short time with each employer and if a female worker were to retire at 65 today she would be expect to live until almost 90. As a consequence of this the majority of Final Salary Schemes were phased out leaving many peoples retirement vastly underfunded. Worse still for the nations retirement income, outside of the state pension, 27% of men and 49% of women have made no pension provision at all. Result – many pensioners retiring in the future will suffer financial hardship. With the state neither willing nor able to fully make up this shortfall something had to change.

The solution is auto enrolment, which, as its name suggests, will automatically enrol employees into their occupational scheme. The thought process behind this is that inertia and apathy will work on the side of saving, and people will sleep walk into having a pension rather than the reverse. The jury is still out on whether this approach will work, but I suspect if it does not the next iteration may be more akin to compulsory enrolment.

Like many initiatives from central government auto enrolment, while well intentioned, will make life harder for employers by increasing both the red tape and the cost of employing people. Unsurprisingly it is also complicated with rules that are easy to fall foul of, particularly for smaller employers like dental practices, who do not have the time or resource to dedicate to another new set of regulations.

To help ensure your compliance with new pension rules money4dentists can explain the terminology and give practical guidance on what you, as business owners, will have to do. We will answer some of the most frequently asked questions such as:

  • When do I have to start doing this?
  • Which employees are eligible?
  • Is our current pension scheme sufficient?
  • What about self-employed staff members?
  • How much will this cost me?

We will also cut through some of the jargon which surrounds pensions in general and auto-enrolment in particular.

If you want to see how auto enrolment affects you and your practice please contact money4dentists for an expert independent assessment.