HOW AUTO ENROLMENT POSTPONEMENT CAN SAVE YOU MONEY

Are you an employer facing auto enrolment? Auto enrolment postponement is a vital tool that can help you to ease the administration burden of your new pension scheme. You can also use it to save your company money.

This article explains why auto enrolment postponement should be set up with every new pension scheme.

Key points:

  • About auto enrolment postponement
  • 4 reasons to postpone contributions
  • Get our free employer auto enrolment checklist

About auto enrolment

If you are an employer you should already know about auto enrolment. For a comprehensive overview, take a look at our beginner’s guide to auto enrolment.

Auto enrolment postponement

Auto enrolment postponement allows you to put off making contributions to your pension scheme for up to 3 months.

Auto enrolment postponement does not allow you to postpone setting up your pension scheme. As an employer you are legally obliged to set up your new pension scheme by your staging date. Failure to set up your scheme in time could mean sanctions by the Pensions Regulator.

4 reasons to postpone contributions

Saving money

The obvious reason is that by postponing contributions to your pension scheme you can save up to 3 months contributions. This could be a significant saving both for you as an employer, and for your employees.

Saving administration

Auto enrolment is a significant burden to you in administration. Therefore, anything you can do to save you unnecessary paperwork should be taken up.

Every time you run your payroll you will need to assess your workforce to determine whether they meet the criteria for automatic enrolment into the new pension plan. This is an administration nightmare for a small company, and can lead to some unfortunate problems with certain classes of employee.

Staging date

At the start of the scheme there will be a number of queries and opt outs by the employees. Therefore, it makes sense to postpone making contributions until 3 months after the scheme is set up. This will help the scheme to get started and for employees to make all the necessary decisions about their membership.

New starters

When you employ new starters it sometimes does not work out. Therefore, it makes sense to postpone membership of the pension scheme until you are both sure that the relationship is likely to continue. After 3 months you should have a good idea of whether the new employee is going to stay with the business.

Salary over the threshold

It makes sense to postpone initial contributions as a staff member reaches the threshold for automatic entry into the scheme. This can save you money in the short term.

However, there is a wider issue to consider. You must determine eligibility by reference to your pay period, not the annual salary. A busy period such as Christmas can lead to seasonal overtime. This can push the employee’s earnings into a higher bracket, and mean that they must be automatically enrolled into the pension scheme, even with just one payment. This is undesirable, especially for lower paid workers. It makes sense to postpone contributions for all staff who reach the threshold for 3 months to avoid someone being enrolled automatically just because one salary payment was higher than normal. This could avoid the problem of a temporary worker being automatically enrolled into the pension scheme when they only work for the business for a few weeks. No-one wants the administration of 1 contribution going into the scheme.

Employee turns 22

When employees turn 22 they become eligible for the pension scheme if they earn above the minimum threshold. Sometimes this period can lead to staff moving on, so it makes sense to postpone contributions for staff who are automatically eligible for the pension scheme.

“Auto enrolment postponement can save you up to 3 months pension contributions.”

Does your pension provider allow auto enrolment postponement?

Not all auto enrolment providers allow for postponement across the board for all the cases outlined above. You should check on this before you commit your business to a particular company.

Want to get started with auto enrolment postponement?

The easiest way to get started is to download our auto enrolment checklist. Just fill out your details in the box below and we’ll email you your checklist.

If your business is in the Colchester or Essex area then we can help you with all of your auto enrolment needs. Contact us to have an initial discussion about your requirements. We’ll help you to get that auto enrolment problem off your desk.

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Dan Woodruff

Certified Financial Planner & Chartered Wealth Manager at Woodruff Financial Planning
Financial Planning helps you to navigate and anticipate significant life changes. I want to help you to ensure your money is managed wisely to give you the financial security that will fund the future and lifestyle that is important to you.

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