Workplace Pension Reform

Due to an ageing population, we are seeing increasing numbers of people collecting state pensions. With this number set to increase even further, and as peoples retirement aspirations grow, relying on state pension alone may not be enough in the future. To pre-empt the situation where people are left dissatisfied with their retirement arrangements, the government has recently made changes to the workplace pension’s law.

A workplace pension is a simple step towards saving for a better future. For every contribution made by an employee towards the retirement fund, the employer and government also make a contribution. The scheme is designed to be simple for the employee, as all the responsibility, time and resource required to comply with the law is focussed on the employer.

When will this impact your business?

This reform will be phased into businesses over a six year period, beginning with large employers from October 2012. Small and micro businesses with 30 employees or less will not have to comply until June 2015. All employers will be issued with a date they must begin compliance with the workplace pension reform, or ‘Staging Date’. You can check your ‘Staging Date’ at:

www.thepensionsregulator.gov.uk/employers/staging-date-timeline.aspx

What are your responsibilities as an employer?

You will need to carry out an assessment on your employees to determine whether they are  ‘eligible jobholders’ who are automatically enrolled in your pension scheme, ‘non-eligible jobholders’ who have the right to opt in, or ‘entitled workers’ who have the right to join.

If you already have an existing pension scheme, you should check whether this meets the criteria for a qualifying pension scheme, or if you need to find a different scheme.

It is your responsibility to communicate to your employees what automatic enrolment means to them. The employee is then free to choose whether they want to remain in the scheme, or wish to opt out.

You will need to register and communicate with The Pensions Regulator, and communicate the specific information with them, as well as keeping records for up to 6 years.

It is also your responsibility is to make the minimum contribution to your employees’ pension. This will start at 1% and increase gradually.

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