Company pensions to be extended further

News Article - 23 May 2012
Category: Business

UK businesses should automatically enrol staff in company pension schemes from 2012, according to a recent Government review. Conducted by the Department for Work and Pensions (DWP), the review follows on from the Pension Act 2008, which introduced reforms requiring all employers to run a suitable pension scheme for eligible staff.

Employees at companies that don't offer an internal scheme will be automatically enrolled in the National Employment Savings Trust (NEST), a new state-sponsored scheme catering for low-to-moderate earners. NEST will start accepting workers in 2012.

The threshold for automatic enrolment has been set at £7,500, up from the original proposal of £5,035. However staff will be entitled to request enrolment and receive employer contributions even if they earn below the threshold.

The DWP has permitted small enterprises three month's leeway before having to enrol new staff. This was designed to benefit companies that rely on temporary or seasonal workers. However, staff will still have the option to request enrolment in the company pension scheme, or the NEST scheme, from the start of their contract.

Small business representatives have warned the administrative and financial burden of compliance could significantly affect the future of small and medium sized companies. ReesRussell partner and UK200Group vice-president Jonathan Russell said that while the measures are to be applauded for attempting to improve employees' financial positions, they are likely to result in dissatisfaction for both employer and employee.

In the current economic climate companies will need to absorb the costs of automatic enrolment efficiently if the measures are not to directly affect the bottom line. Many companies will consider passing on the costs to employees, however this must be considered alongside the discontent employees will no doubt feel if salaries are cut.

Reducing the administrative burden of the measures can help prevent significant costs being passed on to staff. Access HR software and payroll processing software automates many of the common processes involved in implementing new pension schemes, reducing the amount of time key managers need to dedicate to the change.

For more information, please call Access on 0845 345 3300.

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