You may have read in the press recently of the forthcoming employer pensions obligations.
In November 2008 the Pensions Act 2008 introduced measures aimed at encouraging greater private saving. This included a duty on employers to automatically enrol all eligible workers into a qualifying workplace pension scheme (provided they are not already in such a scheme). Most of the measures in the Act will come into effect from 2012. The Act broadened the remit of the Personal Accounts Delivery Authority giving it powers to enable it to establish NEST (National Employment Savings Trust).
Whilst the reforms are currently still under review, the consensus is that NEST will be introduced from 2012 for the largest employers, with other employers being phased in between 2012 and 2016. The Department for Work and Pensions will write to employers in advance to advise them of their start date. As a small employer you may want to continue to read this – as we said the final details are still under review but in view of the extensive spending cuts about to be announced the introduction dates may be brought forward for all employers.
Currently anyone employing five or more staff is obliged to offer them access to a stakeholder pension or company pension scheme. The employer does not have to contribute to this.
Under the NEST scheme the employer will have to pay contributions, probably starting at 1% but rising to 3% of salary. Employees contributions will again be phased in until they are contributing 4%, with tax relief available on this, the final combined contribution from employer and employee will be 8% of salary between £5K – £33.5K a cap on contributions will be set , currently £3,600 pa. Salary includes wages, overtime, bonuses and commission, as well as statutory sick, maternity, paternity or adoption leave.
NEST will apply to all employees who are aged over 22 but below State Pension age, but will be limited to those earning between £5K – £33.5K. Employees earning below or above these levels can ask to be enrolled. Employees can also apply to opt out of the scheme.
Employers can introduce their own scheme or continue to use their occupational scheme as long as it meets or exceeds certain criteria.
Obviously this will have a significant effect on future pay discussions and cash flow forecasts for all employers. Employees will also need to be made aware of the potential for their disposable income to shrink once the scheme takes effect.
It could make sense for you as employers to start thinking about how to implement the scheme now so that when the time comes you have a scheme of your choice in place and are not forced into something unsuitable in a last minute panic.
Clark Howes works closely with strategic partners who can advise on these schemes and we will be happy to make the introduction and work closely with them to ensure you are able to comply with the new regulations once they have been finalised.
