Employers Need To Know About Pensions Changes

Comron Rowe, partner and pensions specialist, advises businesses to make sure new pensions requirements coming in from 2012 are clearly on their radar now.

Pensions are front page news again. Most stories are about changes to state and public sector pensions, the ageing workforce and recent stock market movements.

There has been very little coverage of the new employer duty to automatically enrol staff into a contributory pension scheme. Although pensions and automatic enrolment may seem like a dull subject, these new duties do deserve your attention.

The new duties will be introduced in stages, from October 2012 through to October 2017 (depending on staff numbers) and all employers will eventually need to pay pension contributions of 3% of total salary.

From October 2012 onwards employers will need to "automatically enrol" almost all staff into a "qualifying pension scheme" and start making at least the minimum 1% employer contribution starting with the largest employers first. The minimum employer contributions will increase to 2% from October 2016 and then 3% from October 2017.

All staff aged between 22 and state pension age and earning over £7,475 per year will need to be automatically enrolled into such a scheme without any active decision on their part and other staff can choose to opt in. Although staff may subsequently opt-out, they will need to be automatically re-enrolled every three years!

Employers will need to use either the National Employment Savings Trust (NEST) or a new, or existing pension scheme which meets a minimum standard. Employers will need to review their pension arrangements and certify to the Pensions Regulator that their scheme meets the minimum standard.

Key issues include budgeting for the minimum contributions and making sure that HR, finance, payroll and IT are ready to deal with these new requirements. It will be particularly important to understand who is eligible and to keep accurate records to make sure automatic enrolment occurs on time and opt-outs and re-enrolment are done correctly. Employers also have a duty to communicate the new requirements to staff and there are some strict penalties for encouraging staff to opt-out in any way. 

Preparing for and complying with these new duties will take a lot of work and employers will need to think carefully about how they deal with these new duties. There are likely to be significant administration and systems costs and, more directly, there is also the financial burden of the minimum employer contributions to budget for.

Current polls suggest that many employers do not know much about automatic enrolment. We recommend employers with more than 500 staff start preparations now and those with less than 500 staff get started over the next 12 months.

Foot Anstey has worked with a wide range of organisations to help them understand the 2012 pensions changes and to prepare for these effectively. Please contact Comron for more information on 01752 675156 or email This e-mail address is being protected from spambots. You need JavaScript enabled to view it