Work-based pensions are being reformed to encourage more people to save for their retirement. As an employer, you are likely to be affected by the reforms. To find out more, read on.

What are the changes?

You must provide a pension scheme for certain members of your workforce from 2012 and as an employer, you will need to make a contribution towards it. Even if you already offer pension arrangements for your workers, you will still have some new obligations to meet.

The pension scheme that you provide must meet a number of conditions based on the level of contributions paid or the benefits received. Membership of the scheme must be automatic for certain workers, known as ‘eligible jobholders’. Because these people will not have to do anything to join the scheme, the process is known as ‘automatic enrolment’. Most of your workers are likely to be included in the automatic enrolment process. They can choose not to be in the scheme if they want to, by actively ‘opting out’. If you already have a pension scheme, you may be able to use it if it
meets certain qualifying conditions.

Why are the changes being introduced?

People are living longer and are likely to enjoy a longer retirement. But many people are not saving for their retirement at all, and many who are saving aren’t saving enough.

These changes will give many more people the chance to save for when they retire. The main benefits for your workers are that you pay a contribution and that it is an easy way for them to save. Changes are needed to encourage more people to save for their retirement.

When do the changes come into effect?

Each employer will be given a date from which the changes will have to be in place. This is known as your staging date.

• The first staging dates will be in October 2012 and will continue through to 2016.
• Your staging date will be broadly based on the number of people you have in your PAYE scheme.
• Employers with the largest number of workers will have the earliest staging dates. The smallest employers will have later staging dates from 2014.
• The Pension Regulator will contact you 6 - 12 months before your staging date.

You can find out what your staging date is likely to be by visiting the Pension Regulator website at www.tpr.gov.uk/staging.

You can, of course, set up pension arrangements for your workers at any time. You don’t have to wait until automatic enrolment is introduced in 2012.

What will I have to do?

You will have to automatically enroll your eligible jobholders into a qualifying pension scheme and make an employer contribution towards it.

The main things you must do are:

• Provide a qualifying scheme for your workers
• Automatically enroll all eligible jobholders into the scheme.
• Pay employer contributions for eligible jobholders to the scheme
• Tell all eligible jobholders that: – they have been automatically enrolled and – they have the right to opt out if they want
• Register with the Pensions Regulator details of your qualifying scheme and the number of
  workers that you have automatically enrolled.

You must not:

• Encourage your workers to opt out of the qualifying pension scheme
• Have recruitment practices that will benefit job applicants who indicate they are prepared to opt out or
• Treat a worker unfairly or put them at a disadvantage because of automatic enrolment.

What contributions will I have to make?

You must contribute at least 3 per cent of your worker’s earnings, although you can choose to pay more if you wish. The worker will be responsible for paying the rest. They will get tax relief on their contribution and the total combined contribution will be a minimum of 8 per cent.

There are different rules for different benefit schemes. More details will be available on the Pensions Regulator website later in the year. Contributions will be based on a band of gross annual earnings. When working out your contribution, you do not need to consider any amount your worker earns above the upper earnings threshold.

What if I have an existing pension scheme?

Even if you already provide a pension scheme for your workers, you will need to check if it is a qualifying scheme. It will need to meet certain requirements depending on the type of scheme you have. It must also be appropriate for automatic enrolment. You can find out more by contacting Inspirational Financial Management (IFM) on 0844 980 8801. You should review your existing scheme and discuss the rules and possible changes with your trustees or pension provider.

How will I know if my scheme is a qualifying scheme?

Many occupational and group personal pension schemes will qualify. To be a qualifying scheme, it needs to meet certain requirements.

To be a qualifying scheme, minimum contributions must be made or it must provide a minimum rate at which benefits will build up. Even if it doesn’t qualify at the moment, you may be able to change the scheme rules or amend the terms of the policy so that you will be able to use it by the time your staging date comes around. You may want to speak with one of our specialist advisers about whether your scheme will qualify. We will provide further information later in the year on this website.

What if I do not have an existing pension scheme?

If you do not have an existing pension scheme, you may wish to take advice on how to find a suitable pension provider.

What should I do next?

Inspirational Financial Management (IFM) have a team of specialist advisors who are able to find out when your staging date is likely to be all they need to know is the number of workers and your PAYE Ref.

Where can I find more information?

More information on pensions reform is available at: Department for Work and Pensions (DWP)
www.dwp.gov.uk/policy/pensions-reform