The road to pensions reform is not a fast one, but confirmation today that the government will go ahead with auto-enrolment of employees into workplace pension schemes and minimum contributions for employers (on the DWP website) is certainly a big step forward.
The government set out its plans in response to publication of an independent review (PDF format, 4.2MB) (on the DWP website) which contains some important changes and simplifications, but essentially keeps the previous government's proposals introduced in the 2008 Pensions Act intact (see the background on the DWP site).
A good deal of partnership has been illustrated by the response to the announcement from the two sides of industry, with the CBI warmly welcoming the review and the TUC's Nigel Stanley describing the package as a "historic victory".
The main losers are those lobbying on behalf of small firms, which had hoped to be exempt from the proposals but will not now be. David Bird, senior consultant at Towers Watson, had some interesting comments on this, saying: "Working for a small employer doesn't stop you getting old...If an arbitary line had been drawn, employing one extra person would have triggered pension contributions for all employees and small businesses would not grow."
From October 2012 onwards (the Pensions Regulator has a timeline on its website showing when the new regime will apply to your organisation) employers will be required to automatically enrol all eligible workers into a qualifying pension scheme and make contributions towards it.
Where this is not their workplace scheme, they can enrol employees in the National Employment Savings Trust (NEST), which the government hopes will be the savings vehicle for millions.
When the DWP carried out some research (PDF format, 3.23MB) (on the DWP website) into employers' awareness of the auto-enrolment proposals this year, they found that just 2% of firms had a plan to comply with the reforms.
There is still plenty of time, but there are already lots of resources out there to help employers prepare:
- On XpertHR, you can read the guidance in our employment law manual, research on employers' views, a survey on the schemes offered by employers, tips for employers on getting ready in time and much more (subscription required for these articles).
- More details on NEST will be published over the next few months, meanwhile the NEST Corporation offers guidance for employers on how the scheme will operate.
- The website of the Pensions Regulator provides the low-down on pensions reform while the Pensions Advisory Service has just launched an auto-enrolment planner for employers.