With auto-enrolment staging dates looming for small charities, CFG’s Anjelica Finnegan is here to help, looking at what you need to consider and the guidance available.
Hopefully you already know that if you employ staff you will have a legal obligation to provide a workplace pension. If you are unsure about whether or not auto-enrolment will apply to your charity, the Pensions Regulator (TPR) has a very accessible duties checker which you should look at straight away.
Getting the right scheme for your charity
You may already have a scheme for your staff. If you want to use your existing scheme, then it’s important that you check with the provider that it meets the automatic enrolment rules – not all do.
If you need to choose a new scheme, then you’ll need to find out which ones are available to you, and how to choose between them. Don’t simply go for the first scheme that you find. Shop around before you decide which one is the most suitable for your charity and your staff.
Top five things to think about are:
1. Will a scheme accept all your staff?
Some small charities have struggled to find a pension scheme that will accept their staff. If you are having a similar problem, TPR has a helpful list on their website of pension providers that are willing to take on small employers.
2. Is the scheme compatible with your payroll?
If you use payroll software, ask the payroll provider whether it’s suitable for automatic enrolment and whether it’ll work with your preferred pension scheme.
3. Does your scheme apply appropriate tax relief arrangements?
Different schemes apply different tax relief arrangements – relief at source, or net pay arrangement. If you have staff that don’t pay income tax, it’s important to check that the scheme uses ‘relief at source’ as they would still get tax relief from the government. However, some schemes using other tax relief arrangements may have lower member charges. Consider carefully what is right for your employees.
For more information about tax relief in pension schemes visit TPR’s website: www.tpr.gov.uk/scheme
4. Do the scheme’s investment options suit your charity and staff?
Any scheme that you use for auto-enrolment must have a ‘default investment arrangement’. This is what your staff’s contributions will be put into, as they cannot choose their own investments when automatically enrolled (but they can make a choice after). Charges paid out of member savings in default investment arrangements must be not exceed 0.75% a year of the member’s fund.
You may also need to consider whether the scheme offers investment options that suit the particular needs of your organisation and staff. For example, you may want to consider ethical investment options that match your organisation’s charitable objectives.
5. What are the costs?
It’s important that you know what administrative features your pension scheme offers so that you can weigh up costs and charges against the level of services offered. Some services may make automatic enrolment easier for you over the long term.
Once you have a scheme, know who is doing what
Completing a declaration of compliance is one of a number of tasks to do as part of your automatic enrolment duties. Failure to complete and submit to The Pensions Regulator could result in a fine.
One of the reasons given by employers for missing their declaration of compliance deadline is that they thought somebody else was completing this on their behalf. It is the employer’s legal responsibility to comply with automatic enrolment. You should know when your declaration of compliance deadline is, and ensure that it is completed on time.
So, if you are using payroll bureau, make sure you clearly agree whether they or you will be declaring compliance. CFG’s small charities’ auto-enrolment guide http://bit.ly/2f444Ld covers this in more depth.
You need to write to your staff individually to explain how automatic enrolment applies to them, including how tax relief works. Some schemes may offer to do this for you. If not, TPR has letter templates which you can use.
Where can you get some guidance?
CFG published a guide to auto-enrolment especially for small charities. This free guide takes you through the process from the start and is available to download from the CFG website.
TPR provides CFG with monthly auto-enrolment updates. We tailor these for charities and post them on our blog. Ensure that you keep up-to-date by subscribing: http://blog.cfg.org.uk/
Anjelica Finnegan, Policy and Research Manager, CFG