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Newsroom: Avoid the fines and update your workplace pensions!

Thought Leader

Newsroom: Avoid the fines and update your workplace pensions!

When Virgin Media Pioneers Anthony and Emily Carr began looking into the workplace pension they needed to provide for their employees under the government’s new auto-enrolment scheme, it came as a huge shock.


Anthony says: “When we had that initial meeting and I was terrified. I thought wow, we have really got to start putting things in place. You really have to get on top of it. There is a lot more to it than you imagine, and there are significant fines involved if you don’t get it right.”

Fortunately Anthony and Emily, whose personalised gift business Create Gift Love is based in the New Forest and employs seven people, had left themselves enough time to get organised. After talking to several pension providers they set up their workplace pension last month in February, five months ahead of their deadline in July.

If you are a small business with only a few employees you may think that the new auto-enrolment workplace pension reforms don’t concern you. Well think again. Under the government’s new auto-enrolment legislation, every employer in the country has to provide a workplace pension for eligible staff, whether they have one employee or 10,000 of them. And the deadlines for putting it in place are happening right now.

Under the new legislation, you must enrol into a scheme all employees aged between 22 and the State Pension age who earn at least £10,000 a year and who work in the UK. You must also pay an employer’s contribution of at least 1% of their qualifying earnings into their pension each month, a figure that will shortly rise to 3%, and deduct the employee’s contribution from their earnings before you pay them.

In order to manage the process as efficiently as possible the government has decided to roll out the new requirements in stages. Having begun with the largest companies back in 2012, it is now time for the smallest companies to comply with the legislation too. Each business has been given a deadline by which they must have a workplace pension scheme in place, known as their staging date. For businesses with less than 30 employees these deadlines run each month from November 2015 to November 2017. You can find out yours from the Pension Regulator here.

If you miss your deadline the fines are onerous – an initial £400 fine for non-compliance plus an additional fine of £500 per day if you have five or more employees, or £50 a day if you have less than five. More than 1500 small firms have already been hit with a fine by the Pensions Regulator and thousands more have received warning letters.

The requirement to create a workplace pension is meanwhile causing considerable concern and confusion for small businesses.

A recent survey by the Federation of Small Businesses found that 45% of small business owners who do not already have a workplace pension scheme in place are still unclear about what they need to do, when they need to do it and how much it will cost. A quarter said that they were not confident that their business could cope, while 76% said they thought the introduction of auto-enrolment pensions put too much pressure on businesses like theirs.

Your employees can choose to opt out of the workplace pension scheme you set up but not until they have been automatically enrolled onto it, and you cannot force them to opt out if they don’t want to. If they do opt out, they are allowed to opt back in again at a later date if they choose to.


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