A lot has already been written about the 2012 reforms but in this briefing we explain the basics, giving employers an initial understanding of their obligations.
The Facts
Why make changes to Pensions?
The Department for Work and Pensions (DWP) have estimated that approximately 7 million people are not saving enough to deliver the income they want, or expect, in retirement. To combat this “under saving” the provision of a workplace pension will be introduced from 2012, via a system of auto enrolment.
Are all employers affected?
Except for single person companies, all employers will have to comply. It is estimated that 1.1 million employers currently have no pension provision in place. The number of staff you have will determine the date from which you will need to have a “qualifying” scheme in place – the “staging date”.
What are the rules?
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All eligible employees must be auto enrolled into a “National Employment Savings Trust (NEST)” (formally known as the personal accounts scheme) or qualifying pension scheme from your staging date.
- Employers must pay 3% minimum of qualifying earnings, with employees paying in 4% (plus 1% tax relief) to achieve the 8% minimum contribution.
- Employers must provide clear member communication with on-line tools and calculators
- Employers must ensure an annual review of the scheme as a minimum confirming why investment funds have been selected etc to confirm the scheme is “fit for purpose”.
- Employers must be able to evidence accurate data records on a monthly basis
Who are eligible employees?
All employees aged 22 – 65 and any contract workers, including part time, flexible or temporary contracts. All “other” staff must be given the opportunity to join.
What are qualifying earnings?
Band earnings between £5,035 - £33,540 (2006/7 tax year subject to review by 2012). Earnings include overtime pay, bonus, commission etc.
Who is responsible for auto enrolment?
The employer is fully responsible for ensuring all eligible employees are enrolled on day 1 of your staging date. In addition, all new eligible staff must be auto enrolled on the first day they become eligible. Whilst employees can opt out, they must be auto enrolled again after three years.
What can I do to prepare?
It may seem a long way off but it is important to prepare early as there are a number of factors which you may need to consider. Undertaking a gap analysis will help to identify any remedial action which needs to be undertaken.
Questions to ask yourself:
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If you have a company pension, does it meet the minimum criteria?
- Will new staff have to be included to satisfy the eligibility rules?
- Is membership dependent upon other benefits?
- Are your HR systems able to identify eligible staff and calculate the required contributions?
- Do your contracts of employment need revising?
How can we help?
Belmont International can advise you when your staging date is scheduled and from there, can assist with completing your gap analysis. Any “gaps” can be discussed to ensure they are met with implementation being phased in appropriately.
For help and guidance contact
Alison Etchells
Phone : 01732 744748
Email : Alison.etchells@belmontint.com