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Employers given a longer period for auto-enrolment of staff into pension schemes

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The Department for Work and Pensions (DWP) has confirmed the system of auto-enrolment of staff into pension schemes will be staged over three years, so employees will not have contributions of 8% until 2016.

In the consultation document, Workplace Pension Reform - Completing the Picture, published on Thursday, the DWP announced that employers would be required to meet their obligations to auto-enrol employees over a longer period than had first been anticipated. It also stated that large and medium-sized employers will not be required, as originally intended, to pay the full 3% employer contribution in 2014 but that contributions would now be phased in to reach the full amount in 2016.

Mercer has welcomed the announcement as a ‘common sense' approach.

But Steve Charlton, principal at Mercer, said: "Employers mustn't use this as an excuse to sit on their hands. It's still compliance by 2012 for many employers. We're pleased that the DWP have listened to concerns expressed by the pensions industry on the changes needed to reduce operational risk. Over one million employers need to be included in this process, so it makes sense to spread the introduction for all concerned.

"There is a world of difference between the needs of a large multinational and those of a micro employer, so testing the system and ironing out any issues is a common-sense move." 

But John Jory, deputy chief executive at B&CE Benefit Schemes, disagrees. He said: "It is disappointing that the full 8% contribution will not commence until October 2016 - that's another seven years.

"B&CE has long advocated that auto-enrolment into existing schemes should be brought forward from 2012. If we want people to be able to look forward to having the lifestyle that they expect and deserve, we need to be encouraging them to start saving now."