2012 Pension Reform March 2012

2012 Pension Reform March 2012

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  Active Practice Updates MARCH 2012 plummerparsons apmar2012-pr Employers’ guide to 2012 pensions reform This year will see the introduction of radical pensions reform as the Government attempts to bridge the gap between pension savings and years in retirement with the introduction of auto-enrolment. Pension fact: Just 33 per cent of public sector employees were a member of a workplace pension in 2011 according to the Office for Your Money UPDATE National Statistics. What are the changes? When are the changes coming in? As an employer you will be legally obliged to The reforms are being rolled out from 1 October 2012, starting with the largest companies first. automatically enrol certain members of your The Government has now confirmed the starting dates as follows: staff into a qualifying pension scheme and to make a contribution towards it. Employer size Automatic enrolment duty date From To What will I have to do? 250 or more members 1 October 2012 1 February 2014 50 to 249 members 1 April 2014 1 April 2015 In order to comply with the law, as an employer you will have to: Test tranche for less than 30 1 June 2015 30 June 2015 members • Provide a qualifying pension scheme; 30 to 49 members 1 August 2015 1 October 2015 • Automatically enrol eligible jobholders; Less than 30 members 1 January 2016 1 April 2017 • Pay employer contributions; Employers without PAYE 1 April 2017 • Tell all eligible jobholders that they have schemes been automatically enrolled and that they have the right to opt out; • Register with the Pensions Regulator and Who needs to be enrolled? provide details of your pension scheme Workers known as ‘eligible jobholders’ will need to be enrolled. These are defined as: and the number of people you have • Those that work or ordinarily work in the UK; enrolled. • Aged between 22 and state pension age; • Earning more than the minimum earnings threshold (£8,105 proposed for 2012/13). Those earning more than (a proposed) £5,564 will also be eligible, but you will not be obliged to contribute on their behalf. 18 Hyde Gardens www.plummer-parsons.co.uk Eastbourne BN21 4PT 01323 431 200 [email protected]
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  Your guide to2012 pensions reform What classes as a qualifying pension scheme? The Government has created the National Employment Savings Trust (NEST), for those employers that don’t already have a pension scheme that is suitable for auto-enrolment. NEST ticks all the auto-enrolment boxes, however, you do not have to use NEST. You may be able to use your existing pension scheme, provided it meets certain criteria. Guidance is available from The Pensions Regulator, but the criteria depends on a number of factors, including whether the scheme is defined contribution (DC) or defined benefit (DB) How much will I have to contribute? As an employer you will be expected to contribute a minimum amount into the qualifying pension scheme of eligible jobholders. These are expressed as a percentage of qualifying earnings - between the upper and lower threshold – proposed as £5,564 and £39,853 for 2012/13. Contribution levels are being phased in. The proposed duration periods for defined contribution (DC), personal pension and hybrid pension schemes are as follows (subject to change): Transitional period Duration Employer minimum contribution Total minimum contribution 1 Staging date to 1% 2% 30 September 2017 2 1 October 2017 to 2% 5% 30 September 2018 1 October 2018 onwards 3% 8% The contribution rates for schemes using certification are also being phased in – details are available from The Pensions Regulator. What should I do next? It is important to note that employees are entitled to voluntarily opt out of auto- There are a number of steps you should be enrolment, but that there are a number of considering now in preparation for your safeguards in place to prevent this being staging date. Please contact us to find out recommended by the employer. how we can help you with this, but here are We can help you to budget for the impact of some points to consider: auto-enrolment, and prepare for your staging 1. Find out when your staging date is so date. Please contact us to find out more. that you know how long you have to prepare; 2. Assess your workforce using The Pension Regulator’s criteria to work out who you need to automatically enrol; 3. Review your pension provisions – you may have an existing scheme that will qualify, or you may need to make a few amendments or start from scratch; 4. Communicate what is happening and when to your employees;