Auto-Enrolment Pensions To Go Ahead From 2012

The Coalition Government recently confirmed that it will continue the previous Government’s policy of introducing a requirement for employers to automatically enrol all their employees in a pension scheme. As a society, we are not saving enough to support us through retirement, but as people live longer and healthier lives, a pension may need to cover twenty or even thirty years of retirement. The Government reviewed the original proposals over the summer, and has made some changes, but the general principles remain the same.  Employers will have to enrol all their employees over the age of 22 and under the state retirement age who pay income tax in a pension scheme.  Employer and employee will each have to make a set minimum contribution, starting at 1% of earnings each.  The minimum contribution will increase in stages to the target level of 8% in October 2017. The employer will contribute at least 3%. New employees will have to be auto-enrolled in the pension scheme within three months of their employment commencing, and every individual will have a month from auto-enrolment to opt-out.  The hope is that people’s inertia will mean that few actually do so.  The employer will be required to re-enrol all their employees periodically, at which point the individual will also have to renew their opt-out if they wish it to continue. One important change from the review is that the employer will not be held accountable for the choice of scheme.  This means that if there is a problem with the pension scheme chosen, the employer will not be liable for it. The requirement will be phased in from October 2012, beginning with the biggest companies, employing more than 120,000.  Employers will be informed by the Pensions Regulator twelve months before they are due to begin auto-enrolment.  BWF members are unlikely to be affected before 2014.  Companies employing between 50 and 249 will be brought into the scheme between 1 April and July 2014 and those with fewer than 50 between August 2014 and February 2016.  Existing pension providers are already gearing up to respond to the demand this will create.  In addition to the current providers, a Government-backed pension scheme, the National Employers Savings Trust, will be set up, to provide auto-enrolment pensions to low to moderate earners.