With pension auto enrolment due to come into effect towards the end of this year, businesses need to start planning now if they want to get themselves in order ahead of the big switch.
If planned correctly the impact on resources for your business required to put the workplace pension scheme into place can be minimised.
By October 2012, the largest companies with 120,000 or more employees (followed by staggered enrolment until early 2014 for companies down to 250 employees) will be required to enrol their employees in a pension scheme, contributing 1% of their employee’s salary into a pension to match the 1% paid in by enrolled employees.
This contribution will rise to 3% contribution by businesses and 4% contribution by employees by 2017.
Businesses with less than 250 but more than 50 employees will see auto enrolment become compulsory by 2014, delayed a year from the initial proposals, following a similar increase as the initial rollout.
Businesses with less than 50 employees will now be done in two stages with employees between 30 to 49 employees to be enrolled by October 2015 and less than 30 employees required to enrol their employees in pension schemes by 2017.
Private sector concern
Whilst public sector take up of pensions is high (87% of the public sector currently contribute to pensions), it’s the private sector that is really a concern, with far fewer workers contributing to pension schemes.
The government are trying to combat the drop in numbers of private sector workers paying into pension schemes, which has dropped by almost half since 1991, with this new auto enrolment scheme.
Anyone over 22 years of age and earning over a taxable income will be automatically enrolled in their company pension scheme. It is then their option to opt out or continue to contribute to their pension.
The reforms were put into place as a result of the growing concerns that future generations of the British workforce were heading for retirement without sufficient savings, putting them in danger of poverty in later life. It is estimated that almost 12 million people in the UK have insufficient pension contributions or no pension at all.
Worse still is that for most, a pension or retirement plan is seen as a problem for their future self.
New research compiled by the Populus point towards a potential lack of support for the reforms by the very people it was created to benefit the most. According to the report, up to a third of those surveyed state that they will choose to opt out of the employee pension scheme once it goes live.
Chris Goulds is a digital marketing executive at employee benefits and rewards consultancy, Enrich Benefits.
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