Pension reform; Are you ready for 2012?

From 2012, Pensions will change as all employees will need to automatically be enrolled in a pension scheme by their employer. It is planned that implementation will be phased over a possible 4 years but some larger employers will face changes from 2012.  Large businesses will begin to be enrolled from September 2012, following though to those with under 50 employees by July 2014. So there is some way to go yet.

All employees over the age of 22, who earn between £5,045 and £33,540 per year, will those who will be automatically enrolled into the employers chosen pension scheme. Earnings in this sense do not just constitute salary paid each month, but takes into account bonuses, and commission payments. Employees aged 16-21 earning below £7475 per year will not be automatically enrolled but may request it. Should this be the case employers will then have to enrol them and make the same level of contribution as with all other employees?

Enrolment to the scheme will be gradual, see the pensions regulators website for an idea of when your company will be enrolled.
Figures nearer the time will be based on the number of staff held by employers on 01 April 2012, so it might be an idea to check now to see roughly when your planned implementation date will be and review it again in April 2012 if your staff numbers differ. More information on the role of the pension’s regulator and the process of enrolment can be found on.
 
 All pensions’ schemes, even if employers have existing schemes, must fall within the regulations ‘qualifying schemes’. This can either be scheme run by a bank or building society or a government run ‘National Employee Savings Trust’, and must have the following criterion;
1) Employees must be able to be automatically enrolled and able to opt out should they choose to at a later date. Schemes should not be those where the employee has to make a decision to opt in.
2) The scheme must have a minimum contribution are and a accrual rates which the government aims to set at around 8%
3) Employees must be able to opt out should they not wish to be part of the scheme.

This known as NEST will be the fall back option, should employers not source a private pensions scheme through other means. They advertise themselves to be “simple, low cost option…available to all employers, regardless of size”. And it does just that, complies with the necessary regulations with low start up costs and a maximum contribution over each year.

However it might not be the best scheme for all employers and there are numerous options out there. We advise that employers consult a pension’s advisor and look at other available schemes

For more information on NEST pensions, there website which will give you further guidance on the in’s and outs of the scheme.

Whilst it seems that small businesses will not need to comply until 2013/2014, we advise that those employers who not currently operate a pension scheme, or operate a scheme which is not compliant with the regulations, start investigating now, as to the start up costs of implementing a pension scheme, will be quite significant.  The government plane to make all businesses fully aware of the exact requirement and implementation dates early next year, which we will keep you fully informed of.

Further, as this will be a significant change to employees working terms and conditions, employers will need to consult with employees as to the changes and implement new clauses into each contract of employment. Again we appreciate this maybe a way off in the grand scheme of things but it is something that needs to be considered. Lawgistics is happy to draft contract addendums, for members, to incorporate your chosen pension scheme.

Published: 10 Oct 2011

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