Auto enrolment for pensions to affect all employers
Following the release of an independent review into the
implementation of pension auto enrolment, the government has agreed
that all employers must provide pension schemes or enrol staff in
to the new National Employment Savings Trust (NEST) from 2012.
The review, entitled 'Making Auto Enrolment
Work', "represented a sensible and balanced package of
proposals", the majority of which will now be implemented.
The proposals stated that, whilst small businesses must be
included in the new duties, they will be brought in last, behind
large and medium-sized enterprises. New businesses that are founded
between April 2012 and March 2016 will be brought in at the end, to
allow them time to get up and running.
Originally, the report had considered making smaller employers
exempt, but decided against this after finding it would exclude 1.2
million employees by doing so.
"We could not have come to this conclusion had we not been
convinced that NEST will provide a pension scheme that will be
appropriate to most small employers, and one which will be very
easy for them to use," said the report.
The review also recommends that employers will have three months
to enrol eligible staff, who must be earning at least £7,475 a
year.
Dr Adam Marshall, Director of Policy at the British Chambers of
Commerce (BCC), said, "Thanks to the 12-week exemption, companies
with a high turnover of staff or a large number of seasonal workers
will not have to spend a lot of time and money enrolling employees
into pensions that they do not intend to continue."
Is there anything I should be doing now, as an
employer?
- The proposals at least confirm some continuity in policy about
workplace pensions as they are largely carried over from work put
in place by the previous Labour government.
- Key to the proposals are that the employer must contribute 3%
of an employee's pay into the pension fund, with the employee
contributing 2% and 1% being recovered from the State through
National Insurance.
- Employers will not have to set up their own pension schemes –
they can use the government's NEST scheme – but they will have to
ensure they can afford the contributions.
- Employers which already provide pensions for their staff should
ensure the schemes meet the new minimum standard of
contributions.
- Employers who do not already provide a scheme should build the
potential cost of employer contributions into their planning.
Also see NEST Egg pensions on the
way.