Paul Phillis & Co Limited

Chartered Accountants

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11a Corelli Street

Newport NP19 7AR

01633 267372


November 2013

With the employee opt-out rates reported by those employees who have already “staged” being much lower than anticipated, only 9% compared to the anticipated 30%, now is the time to start putting plans in place for your staff.

This change could could have a significant impact to the cost base of your business and now is the time to prepare.

Auto enrolment update

“Auto enrolment: time to get ready!”

All employers, at various stages, will have to implement pension auto-enrolment rules.  To summarise, both the employee and employer will have to pay a contribution of the employees gross pay into a pension scheme, unless the employee chooses to opt out. The contribution will increase over time, starting at 1% each, rising to 3% and 4%, respectively, by 2018.  The scheme is only offered to eligible employees which at the moment are those aged 22 years and over and earning more than £9,440 per annum.


The biggest change in pension legislation in years could bring significant challenges, especially for smaller employers.

Set some time aside to consider how the rules are going to affect you, decide who is going to be dealing with the enrolment, make a list of eligible staff, carry out some research or enlist an Independent Financial Advisor to give you some advice on good pension schemes.  

Next steps

As always, we are happy to help advise on these changes or explain them and relevant planning opportunities in further detail. If you are an existing client please speak to your regular contact.

If you are not a client and would like to arrange a free, non-obligation consultation on this or any other matter you feel that we may assist you on please call us on 01633 290745 or complete our contact form to arrange a visit.  To receive these newsletters direct to your inbox, please sign-up to our mailing list.


All large employers have already implemented the new rules, next it's the turn of small and medium sized employers.  Although your staging date may seem a long way away, it's anticipated that 2014 will the busiest period for business's to start the auto enrolment process.  An obvious reason to enrol early is that the bringing the new system into place takes time, staff need to be reviewed for their eligibility, new software may need to be ordered and staff will need to be trained to ensure the procedures are run correctly.  However, another crucial point for employers to consider is what pension provider to choose.  Although the government's NEST pension scheme is open to all employers, it has recently been criticised for its high level of fees.  Its management fee is only 0.3% but it also charges a 1.8% fee on all contributions.  If there is a large influx of companies looking to start a scheme close to their staging date it is inevitable that the pension providers will become selective and some companies will be left with the prospect that the more competitive schemes don't want their business.  The cap on management fees is currently 1% but the average fee to date is 0.52%, 0.50% may sound negligible but over the working life of an employee it could make a considerable difference.

Why worry now?

And don't forget about penalties! Fixed non- compliance penalties of £400 are in place but more serious non-compliance issues can incur daily penalties of up to £10,000 depending on the size of the employer.