The Government is changing law on workplace pensions to address the problem of more than 7 million workers not saving enough to fund their retirement. Three bodies are working together to implement the changes.
- Department for Work and Pensions (DWP) (Policy and legislation).
- The Pensions Regulator (TPR) (Compliance).
- National Employment Savings Trust (NEST) provides a low cost workplace pension scheme over-seen by Trustees .
The changes in the law will affect EVERY employer, regardless of how many employees they have and will start to come into effect from October this year with companies who have over 120,000 staff having to have a suitable scheme in place by then. Smaller companies will follow over 4 years. The Government says that those with 50 staff or less will have to provide a scheme by a date yet to be specified as it falls after the current Government term ends in May 2015.
Employers will be obliged to do the following (non-compliance carries a financial penalty):
- Put a pension scheme in place by the appropriate date.
- Automatically enrol eligible workers (those between 22 and state pension age who earn more than £7,475 and work in the UK. Non eligible workers can opt in. Workers can opt out at any time).
- You MUST contribute to their pension. Employer’s contributions start at 1% and rise to 3% with the employee contributing up to 4% and 1% from tax relief giving a total of 8% by October 2017.
- Register your scheme with TPR which MUST meet certain criteria.
- Provide your employees with written information about the scheme.
You will need to find out your staging date, look for a suitable scheme if you don’t already have one, establish how many of your staff will be eligible and, last but not least, what it will cost you, well in advance.