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Auto-enrolment into occupational pensions to go ahead but with simpler rules than envisaged


It's official: every employer will have to offer a company pension from 2012 following the latest Government review.

The news means auto-enrolment into occupational pensions will go ahead as planned by the previous Government, but the rules will be simpler than previously envisaged, allowing staff to work at a new company for 12 weeks before being auto-enrolled into a savings fund.

Minister of state for pensions, Steve Webb said: "Our reforms will ensure that millions of people will start to save for their retirement, many for the first time.  I welcome the sensible and balanced proposals from the independent review team, which will help ensure automatic enrolment works.  Building on the consensus for pension reform, NEST will play its part as we transform the savings culture in this country."
The National Employment Savings Trust (NEST) will be the new low-cost pension scheme that will be the vehicle for saving for millions.
For the first time employers will have to make pension contributions for eligible workers from 2012, ending decades of decline of membership in workplace pension schemes.  Between four and eight million people will start to build up savings or save more in a workplace pension - helping to ensure that people can enjoy the retirement they want.
The key changes to be implemented as a result of the review are:
·        Aligning the earnings threshold at which an individual is automatically enrolled with the personal allowance for income tax;
·        Introducing an optional waiting period of up to three months before a worker needs to be automatically enrolled, though workers may opt in during the waiting period;
·        Simplifying the process for employers to certify that their money-purchase scheme meets requirements;
·        Introducing further deregulatory measures to reduce burdens on employers.


Responding to the announcement on changes to private pensions from 2012, Adam Marshall, director of policy at the British Chambers of Commerce (BCC), said: "Businesses will be relieved to hear that the Government has decided to simplify and streamline the 2012 pension reforms – which represent an enormous change to private pension provision.
"The BCC is pleased that the Government accepted our case for a 12-week exemption. Thanks to the 12-week exemption, companies with a high turnover of staff or a large number of seasonal workers will not have to spend a lot of time and money enrolling employees into pensions they do not intend to continue. Employment agencies, which will be very important in the fight against unemployment and underemployment in the years ahead, will benefit hugely from this change.
"Today’s announcement shows there are ways to simplify regulation that can give the private sector the confidence to create new jobs. Now the Government must embark on a communications drive to inform the 1.1 million employers in the UK of their new obligations. Unless businesses and their employees understand the changes ahead, we could see significant confusion as auto-enrolment comes in from 2012."


But Joanne Segars, NAPF chief executive, said: "The Government has listened to most of the NAPF’s recommendations by adopting a common-sense approach that will widen pension provision, whilst still keeping existing good schemes open.

"It is a relief that all employers will be brought into the 2012 programme, and that smaller outfits will not be exempt. The whole point of this reform is that pensions reach all workers, including those in small firms.

"Giving a three-month waiting period before an employee is auto-enrolled will help ensure that managing auto-enrolment is straightforward for employers. Staff who are keen to save can join the pension on day one, and don’t have to wait three months.

"We are pleased the Government ignored calls to significantly raise the earnings bar at which auto-enrolment is triggered. This would have put pensions beyond the reach of the very workers we need to reach. Raising the auto-enrolment trigger to £7,500 pa, with contributions payable from around £5,000 will help ensure that it pays to save, and that pounds not pence are paid into a saver’s pension.

"The greater flexibility on certification and the earnings band on which contributions must be paid echoes the NAPF’s calls for a common-sense approach. This will aid existing, good quality pension schemes to auto-enrol, and will help avert levelling-down.

"These reforms have been a very long time coming. We must move ahead at full speed to implement them to tackle the UK’s growing retirement savings crisis. A large swathe of employees currently has no access to a workplace pension, and that must be changed."