The Regulations are complex and technical. Implementation is to be phased in over a three year period, based on size of organisation, commencing 1st October 2012.
The Regulations impose a two fold duty on Employers:
The first duty is to offer a Qualifying (work-based pension) Scheme into which ‘Qualifying Employees’ must be automatically enrolled (provided they are not already in a suitable scheme).
The second duty is to make a minimum contribution. This will gradually rise through the transitional period but by October 2017 the minimum contribution by an Employer will be 3% (the Qualifying Jobholder will need to contribute 4% with an additional 1% coming from the Government in the form of tax relief, giving a total of 8%) of Qualified Earnings.
A qualifying workplace pension scheme must be either an employer sponsored pension arrangement that satisfies specified quality tests or the personal accounts scheme. The personal accounts scheme is to be called NEST – the National Employment Savings Trust.
Non-compliance could result in: compliance notices and unpaid contribution notices, fixed penalties (of £500) and, if the breach is not remedied, escalating penalties of between £50 and £10,000 per day depending on the number of employees within the organisation. In the case of repeated and serious non-compliance there may be criminal sanctions.
Whilst you may think implementation is some time away, you should nevertheless start thinking, planning or at the very least budgeting ahead for the additional cost, not only in pension contributions but also the cost of the administration of the Scheme.
Employers should seek professional advice from their existing pension providers or there are a range of organisations that are able to assist with facilitating Pension provisions such as Banks, Insurance Companies, Brokers and Independent Financial Advisors – and we suggest that you only obtain advice from those organisations / individuals that are registered with the FSA (Financial Services Authority).
Further and more detailed information can be obtained from: