Pension auto-enrolment rules in the United Kingdom mandate that all full-time employees above the age of 22 years who earn more than £10,000 annually must be enrolled automatically into a workplace pension scheme.
The scheme came into being as a result of growing concerns that, with life expectancy extending every year, too many among Britain’s older working population were approaching retirement age with insufficient income to live off in the form of occupational pensions. A State Pension alone makes for a relatively poor standard of living for the rest of one’s days unless remedial action is taken to avert such a scenario.
Increasingly, growing numbers of British businesses with contingents of older employees are making an ethical commitment to support them in maximising their pension contributions. That avoids facing their later years in poverty and, on the contrary, having something to look forward to when they retire.
Let’s take a closer look at how these enlightened employers are achieving this with their older workforce and how cutting-edge payroll software is helping ensure the goal of a comfortable retirement is safely met for all.
Maximising pension contributions
It’s fair to say that since the launch of auto-enrolment in the UK and the publicity warning of pensioners in poverty that surrounded it, more employers and employees than ever before have become aware of the need for working people to make sufficient savings for their retirement years.
Simply getting one’s staff to save regularly and reliably via auto-enrolment is just the first step. Contribution levels also have to be sufficient if people are to secure the lifestyle they want in their retirement. Naturally, this is an especially pressing issue with older employees with shorter employment spans ahead of them than their younger counterparts.
Here are some key steps to achieving a good outcome that benefits both older employees and the companies that support them to achieve a more comfortable retirement than they would have experienced without them.
Being clear about tax codes: It’s essential to get this right and understand what tax codes signify. So, without further ado, here’s a quick tax codes briefing. Essentially, the PAYE system allots a code to each employee that signifies how much of their income HMRC will take in the form of tax.
Being clear about this is helpful for employers seeking to financially support older employees in achieving a viable pension, as pension contributions will also be deducted from their monthly salaries.
Employers who want to stand out from the competition increasingly offer higher monthly employer contributions to these workers’ pensions than the requisite minimum. Even if this goes no further than matching employer contributions (rather than paying the mandatory minimum), it significantly helps staff to appreciate the importance of their future financial well-being. This is, in fact, a major means of supporting older employees, especially in securing a viable retirement income.
Engaging in financial education: It’s worth explaining to employees who may be worried about additional deductions coming out of their pay packets for pensions. For example, they’re inclined to be less troubled by this when they understand that all employees registering with an occupational pensions scheme registered with HMRC will be allowed to have these contributions deducted against their taxable income.
Few workers will be aware of this unless it’s explained to them, as approximately 70% of over-65s in Britain continue working full-time because they’re uncertain they have enough money set aside for their retirement. By becoming aware of the tax relief implications of making good pension contributions, older workers are more likely to have greater confidence in them and resist opting out of auto-enrolment schemes to their eventual detriment.
Using cloud payroll software
Administering staff payroll was complicated enough before the introduction of pensions auto-enrolment but has, expectedly, become even more so as a result. It consumes hours when managed manually, and given that error is a universal human attribute, it’s prone to glitches and miscalculations due to simple but inevitable mistakes.
But there are now alternatives to the cost in time and/or fees paid to hiring, say, dedicated payroll employees or accountants and consultants with payroll expertise. And the technology is affordable enough to be an attractive option for small businesses as well as larger enterprises.
These alternatives take the form of innovative new cloud payroll software that accurately automates the most time-consuming, laborious and error-prone payroll administration tasks – including employee pension contributions. And it auto-updates to keep abreast of ever-changing legislation and other developments.
It comes as little surprise that the market in these automated payroll and invoicing solutions has been booming in the UK of late, not least because they’re financially well within reach of smaller firms.
