Pensions Reform and Employer Duties
2012 starts a whole new regime for the provision of retirement savings in the UK. The Government’s last attempt at increasing provision failed when, in April 2001, they launched the Stakeholder Pension regulations. Its failure was, in my opinion and that of many other specialists, due to the lack of political will to make pension contributions compulsory. There are currently 13.6m employees in the UK with no pension and as they retire their cost to the State increases.
The new 2012 regulations will change all that.
The Government views employers as the ideal vehicle from which to launch its new regime. Employers pay their employees, and therefore have good access to their monthly income from which to make deductions. Surveys also show that employees see employers as a trusted source of information. So, not only do you have to take on the responsibilities placed on you by the new legislation, but also the onerous task of making choices which will impact on your workforce in the future. You can no longer bury your head in the sand. This time you have to act.
What are the new regulations and when will they affect you and your staff?
Firstly you will need to familiarise yourself with the regulations.
The new auto enrolment regulations mean that from a set date in the future (your staging date) as an employer you will need to automatically enrol all new and existing employees who are eligible workers into either the new National Employer Savings Trust (NEST) or into your own Company Pension Plan. The staging date varies, depending on your employee numbers – to find out your staging date go to www.dwp.gov.uk/docs/staging-dates-by-employer.pdf As you will also see, for an employer with less than 50 employees, you need to check your PAYE number and you can then check the latest date by which you need to be ready. But beware! You do need to be ready by then, and that will involve a lot of preparation.
Assess the workforce
Evaluate your eligible workers – you will need to know who is and who is not going to need to be automatically enrolled. If the worker falls under your responsibility then they are eligible. The rules are complex where agency workers and other irregular employment take place, so it pays to get the right advice where you are unsure.
Put in place administrative processes to meet the Auto Enrolment Provisions
Having identified an eligible worker you will need to then make sure that your systems can track the workforce over time to identify changes and new eligible workers and the dates on which they became eligible. Non compliance will be met with penalties and the suggested levels range from £400.00 with a further daily rate (£50 per day up to £10,000 per day depending on the workforce size and severity of the offence)
There will be lots of questions at this point depending on where you as an employer are on the timeline. Do you have a current pension plan? Is it suitable for auto enrolment? Will you be able to get the support you need to meet the requirements of the new legislation? Is the NEST plan the right one for my staff? Advisors are preparing themselves and we are no different. Preparation will be well worth the effort.
· Information will need to be provided to the various categories of workers within prescribed timescales.
· Your payroll systems will need to be able to make the correct deductions and to change those deductions over time as both pay changes and we move closer to 2017 when the full impact of the contribution costs will be felt. This is critical especially where a weekly payroll is involved.
· You will need to ensure that the deductions fit the definition of pay which is relevant to your workforce. That will depend on which type of Scheme you have chosen, or are currently operating.
· Be prepared for “opt outs”. Eligible jobholders can, within one month of being auto enrolled, opt out. Safeguards have been put in place to protect individuals under the Workplace Pensions Reform, and you must have had no influence on this decision. If you receive an opt out notice, this will require you to refund the jobholder with any deductions made. Once opted out an employee must then be automatically re-enrolled in 3 years time, starting the process over again.
· Some workers who are not eligible may wish to “opt in”. This is a statutory right and your systems will again need to take account of them.
Will it work?
There are various bodies of specialists who have given us an indication of the outcome. Overall the starting point is that NEST and auto enrolment will over time change the public view of saving for retirement bringing it up the agenda. The early data suggests 6 to 9m people will be auto enrolled and around 4m of that number will stay in the National Employer Saving Trust. For those with a lot of low paid, or temporary workers that Plan might be an ideal solution.
Help is at hand
For the rest the issue of choice of provider, and structure of plan will be critical. There will be a greater degree of flexibility, and more control for Employers making their own choices. Help is at hand – so don’t leave it too late. Early planning will benefit you in the long term. At our business we have an online booklet you can register to receive at www.cbg-group.co.uk or call us for a copy. Once you have registered we will keep you up to date with developments and discuss with you our services.
Director of Pensions and Workplace
CBG Financial Services Ltd