Workplace pension reforms

Major reforms to workplace pensions will be implemented from October 2012. The reforms will affect all employers, irrespective of their size or type of business. For the first time, employers must automatically enrol certain workers into a pension scheme that meets certain quality criteria, and employers will have to pay a minimum level of contributions.

Wragge & co have produced a comprehensive three part guide to workplace pension reform which is available on their website, including a glossary of terms.

• Part one, employer duties.     
• Part two, implementing the reforms. 
• Part three, administering the reforms and Glossary.            

The reforms are complex and present an array of issues for employers. To get you started, here is some basic information:

Duties

Employers, regardless of size, and will be required to:

• Ensure all eligible jobholders are members of a qualifying scheme
• Automatically enrol all eligible jobholders who are not already enrolled in a qualifying scheme
• Pay contributions on behalf of enrolled jobholders and ensure the total level of contributions is at least equal to the minimum level
• Provide certain prescribed information to all workers.

Employers will also have to administer a re-enrolment process every three years, administer and process opt-out notices, and pay refunds. They will also be required to keep records and register with the Pensions Regulator. Employers will be obliged to adhere to certain safeguards to ensure compliance.

Implementing the reforms

The new employer duties under workplace pension reform are being introduced gradually over four years. They will apply to the largest employers (those employing more than 120,000 people) from 1 October 2012.

Each month a new batch of employers will become subject to the employer duties. By 1 September 2016 all UK employers will have to comply. An employer will become subject to employer duties when it reaches its staging date, which is determined by reference to the size of an employer’s PAYE scheme.

The Pensions Regulator provides a quick and easy online tool that enables employers to find out their staging date.  

However, a recent announcement says that employers with fewer than 50 people in their largest PAYE scheme will not have to automatically enrol their staff until May 2015 (rather than April 2014).  More than 44% of the entire UK workforce – the equivalent of about four million people – are thought to work in companies of this size. For larger employers with likely staging dates between 1 October 2012 and 1 July 2013 the dates will be unchanged. As a result of the announcement the Pensions Regulator will update its guidance on staging and the phasing of contributions as soon as the Government publishes the revised schedule.