In The Press
Author Richard T Lishman, Managing Director of money4dentists, a firm of specialist Independent Financial Advisers who help dentists across the UK manage their money and achieve their financial and lifestyle goals.
Don't ignore it
Even if you wanted to, it'd be hard to avoid Workie, the Department of Work and Pensions' (DWP) psychedelic mascot. Appearing in a recent ad campaign, the giant, furry creature is intended to remind employers about the Government's auto-enrolment pension initiative and its impending deadline. Quite what Workie – whatever he is – has to do with pensions is unclear, but if he gets the message across, so be it.
And as we're all aware, the final deadline for auto-enrolment is 2017, by which time all employers must have enrolled their eligible staff (that is, if they earn at least £10,000, are aged between 22 and the state pension age, and work in the UK) into a workplace pension scheme. Technically, auto-enrolment started in 2012, though the DWP staggered deadlines over a five-year period – depending on the size of a business's workforce. These 'staging dates' can be found by visiting the Government website: https://www.gov.uk/workplace-pensions-employers.
Most dental practices will have a relatively small workforce, meaning they will not be required to complete auto-enrolment until between 2015 and 2017. However, the Pensions Regulator website suggests that businesses should begin to plan for auto-enrolment at least 12 months before their staging date, so if you haven't started looking into your desired pension scheme yet, now is most certainly the time to do so.
Choosing the best pension scheme to enrol your employees in to, however, can be particularly complicated, since it is vitally important to choose one that is appropriate to you and your employees' needs. The scheme most commonly chosen is the Defined Contribution scheme, into which both the employee and the employer make investable contributions. The total available when the employee eventually retires is entirely dependant on how much has been deposited over the extended term and how well any investment has performed.
While employers are ultimately responsible for enrolling their employees onto a pension scheme, some employees may choose different schemes, depending on their own preference. Examples are the Defined Benefit or Hybrid schemes which differ from the Defined Contribution scheme in that an employee will receive, upon retirement, a sum that is dependant on their earnings and the length of time they have been committed to their pension. Should any of your employees wish to choose their own scheme, you must be prepared to accommodate them – though remember that if they wish to use one of these schemes you will not be required to enrol them until September 2017.
Alternatively, you may already have a pension scheme set up for your staff; this could be a stakeholder scheme or a group personal pension scheme and in some cases you will be able to continue to use this – depending on its suitability and whether or not the provider states that it can be used for auto-enrolment. This has the potential to be a pitfall for many business owners, especially if they think their pension scheme is eligible when it's actually not. The most prudent course of action is to check with a financial specialist in plenty of time, in case you are required to make any changes to your plan. There is, after all, no harm in being sure – and it'll certainly help avoid any nasty surprises come your official staging date.
Of course, the Government initially introduced the auto-enrolment initiative to combat the fact that the UK population, despite living for longer and longer, continues to consistently under-save for its financial future. And while auto-enrolment may be step in the right direction, it is estimated that millions of people will choose to opt out of their pensions schemes. Ultimately, this is your employee's choice, but you must enrol them onto a scheme in the first place. However, it is your duty to impress upon employees who are intending to do so that they must act quickly, since any savings that have accumulated for longer than a month will not be released until retirement.
Lastly, you have to remember that if you fail to enrol your staff into a pension scheme by your designated staging date you will be liable to pay a fixed penalty fine of £400. If you continue to ignore Workie's predications, you will begin to receive a daily fine of between £50 to £10,000 depending on the size of your company. Obviously, therefore, it really does pay to heed the warnings and stay on top of auto-enrolment.
As with any significant business decision, you need to be sure you have made the right choice before proceeding. Talking to specialist dental advisers is the best course of action, and can save you time, stress and additional expense down the line. Being well-informed and prepared is the best way you can move your business on successfully – and by talking to the experts, you can be.