The Past has been Bottled…
I spent most of the weekend reading the draft regulations on automatic enrolment. (I know, but someone’s got to do it.) I reckon I’ll be writing about them on the BeeHive most of this week and speaking about what it’s all likely to mean in practice at our many pension seminars around the country for the foreseeable future. It’s a big topic with plenty of ramifications for every employer in the UK. Anyone who thinks pensions are complicated now will, I think, one day be looking back on these days as a time long past when things seemed oh-so simple.
In case you don’t know already, in 2012 all employers in the UK will be required by law to provide a private sector qualifying workplace pension scheme for their eligible employees. Millions of employees will become eligible for auto-enrolment into a private sector qualifying workplace pension scheme on day one. The responsibility for the auto-enrolment of these many millions falls to their employers; it’s they, not the Government, who will be running the auto-enrolment process. These draft regulations are scoping out just what that is likely to entail in every workplace up and down the land.
To start at the beginning, I guess; what will an ‘eligible’ employee look like? Will they be easy for busy employers to spot?
Employees will be eligible for auto-enrolment (which means they HAVE to be auto-enrolled, by the way) unless:
- they are already in a qualifying workplace pension scheme
- they are under the age of 22; or
- they earn less than £5,035 a year (in today’s money that is – employers will have to keep an eye on the actual earnings level as it will be changing over time.)
So, in layman’s terms every employee who’s not already in a pension scheme will be put into one by their employer unless they’re young or really not earning very much.
A ‘qualifying’ workplace pension scheme will be one that the employer pays at least 3% of a certain band of earnings into each year and that receives a minimum contribution of at least 8% in total contributions each year (more of that in a later BeeLine). If people are paying into a personal pension that their employer isn’t paying into then that won’t count; their employer will have to auto-enrol them into another one.
It’s easy, of course, to say that it should be the employer’s responsibility to auto-enrol their eligible employees. It’s great that more people should get a private sector company pension scheme available to them. But it’s only when you get into the nitty-gritty detail of how that will be achieved in practice in every business large and small, day-in, day-out, however, that the enormity of what it will actually mean sinks in. That’s what hit me most when reading and re-reading this first set of draft regulations following last year’s Pensions Act (there’ll be many more to follow, by the way); just the enormity of it all really.
As I said, this will affect all employers, from the very largest to the very smallest. Even big corporations running generous final salary schemes may have some ‘eligible’ employees; they may even have many of them; or none. But the minimum that any company will get away with from 2012 will be to certify that they have no employees eligible for auto-enrolment. My guess is there won’t be many companies that will be able to do that.
Reading these draft regulations I had to keep reminding myself that these new rules and processes will one day affect companies from large multinational corporations right down to chip shops and sandwich bars; and all points in between. While it might be a bit inconvenient for the professional HR departments of large firms to add these new processes and requirements to their daily-growing list of such things, my guess is it’ll all hit my local chippie like a rocket.
16 March 2009
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