Workplace Pension Reforms 2012
The Government are increasingly concerned that everyone should be saving towards their retirement and have introduced far reaching new laws that should mean all employees have access to a pension scheme – and get contributions from their employer.
Auto-enrolment means that all staff (with a few limited exceptions) must be put into the scheme. They can choose to opt out – but it is hoped that most will stay in.
This is likely to be especially costly for smaller companies who either have a Stakeholder scheme which they do not pay contributions towards for their workers, or no scheme at all.
The new rules come into force from September 2012 and will be phased in over 3-4 years, with the largest firms joining up first. Businesses with less than 50 employees will have start dates in 2015 -2016.
Contributions levels
Once fully operational employers will have to pay a minimum of 3% of earnings to the scheme, the employee 4% and the Government will add 1%. There are some exceptions for the youngest workers and the very low paid, but almost all other staff whether full time, part time, temporary or casual will be included.
The cost to businesses is going to be far greater than just the 3% contributions. They must also factor in the time and costs of setting up schemes, ongoing administration, reviewing and amending any existing scheme rules and producing information for staff.
Employers of all sizes will need to review their existing arrangements, identify where they fall short of the new requirements and take steps to bring them up to scratch. For example the new regulations mean that the scheme rules must permit the employee to be automatically put into the scheme, without any action from them.
A low-cost national pension scheme dubbed NEST is planned as a provider of the most basic type of scheme – although this is under review by the new Government and it is increasingly likely that it will be left to insurance companies to provide the schemes.
Whilst there are likely to be changes to the detail, it is widely expected that auto-enrolment will go ahead pretty much as planned. Businesses should be starting to plan now for the changes, and the first step should be seeking the help of professional financial advisers.
Help is available – Juniper will be delighted to help you plan for your business. Call us on 01903 237116 or email juniper@juniperpensions.co.uk.
Download our Auto-Enrolment Information or visit our page Identify and quantify on this website for more information.