MAJOR PENSION CHANGES - Do you fully understand the implications of Auto-Enrolment and all the options available to you?

• Auto-Enrolment is designed specifically to encourage lower earners to start making provision towards their own retirement.  The new regulations will mean an increase in payroll costs for many businesses.
• Large employers (by the total number of employees) are already affected from this month, with smaller employers having to comply with a later phase of staging dates based on the number of workers on their payroll.
• The recent introduction of the National Employee Savings Trust (‘NEST’) by the Government has created a new national pension scheme designed to provide retirement benefits for low-paid workers who will be auto-enrolled.
• Employers who want or need an alternative to having a group pension with an insurance company will be able to use the NEST or use an alternative group pension but only if it is suitable.
• Auto Enrolment will force employers to pay a contribution into an enrolled employee’s pension. There are detailed rules about which employees are eligible based on age and levels of pay.
• There is a facility for employees to opt-out of the auto-enrolment process; however there will be strict rules preventing employers from encouraging their employees to opt out, with heavy fines and penalties on employers who don’t comply.
• For all enrolled employees there must be a total pension contribution of at least 8% of salary by the end of the phased increases (including tax relief), of which the employer must pay at least 3%.
• The employer has to auto-enrol each employee every three years unless they opt out each time even if they have previously stated they do not wish to join a workplace pension plan.

Major questions for employers to consider...
Based on the impending changes employers are now faced with a number of
questions:

How many of your employees will be affected by the Auto-Enrolment eligibility rules?

Will any of your employees opt-out, and can you afford to rely on this to avoid the expense of providing pensions for more of your employees?

Will the opt-out regulations continue, or is it likely that eventually all employees will be forced to make workplace savings in future? If so, would it be better to start planning

now with a small contribution and ‘phase-in’ an appropriate level of contributions for the employer and its employees.

What effect do the new rules have on your current group pension scheme(s)?

Does the current company pension scheme meet the new criteria and can it be used for auto-enrolment rather than the new NEST arrangement?

Is there any advantage to using NEST rather than your own company pension plan, and should you consider using both for different categories of employee?

Is there a better alternative available to NEST and your current company pension scheme? A general review of all available options may be sensible.

At a more fundamental level, is there a place for decent employee benefits in your company, and is it cost effective to try to do better than the new minimum standard?

 

To arrange a free informal initial discussion about your company's pension and employee benefits, please call 0191 256 9600 and speak to a member of our corporate team.

 

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Blackett Walker Ltd is authorised and regulated by the Financial Services Authority (FSA) although some of the services we provide or products we recommend may not be regulated by the FSA.