It’s been a long time coming but the era of quasi compulsory pensions is now upon us.
Whitehall has finally conceded that Inflation-linked State pension provision is simply unsustainable so long as life expectancy keeps marching relentlessly ahead. The solution, rather predictably, is for employees and their employers to contribute to privately operated pension schemes to supplement whatever the government can or cannot afford in the future.
This is such a large exercise that the government has quite sensibly staged enrolment into the scheme over a few years so that pension providers and trustee organisations aren’t swamped. Starting with the largest employers, auto-enrolment is already underway and, even if your place in the staging queue is still months or even a year or two down the track, you will be well advised not to keep kicking this particular can down the road. It won’t go away!
The time left will disappear very quickly and there is a real danger that, even with the process being staggered, the qualified pension providers will suffer severe capacity problems and subsequent bottlenecks. In addition, every company should allow a minimum of 12 months to prepare themselves for their own enrolment day.
Since employers are also required to contribute a minimum of 3 % of wages and salaries into the schemes, many companies, particularly in the SME sector, will need to budget for this well in advance since it may well impact upon whether they can or cannot afford changes in other forms of remuneration.
Here are just some of the questions that employers will need to consider well in advance of auto-enrolment:
When exactly is my staging date?
How many of my employees are likely to be included?
Should I have different schemes for different types of employees?
Should I decide to set up my own scheme or use the National Employment Savings Trust (NEST) scheme or an equivalent?
How will I deal with auto-enrolment in practical terms? Who will I task with compliance, getting the scheme up and running and then administering it?
Clearly, the vast majority of employers will require external, professional advice on auto-enrolment and this, in itself, will require some research. Assembling all the information needed is a formidable task and many small companies are bound to find outsourcing is the best solution. Once everything is up and running, immaculate records will need to be maintained either by someone in-house or externally by a third party.
This is a guest post for TheEmployable