26 April 2012

Towards a golden nest egg

Despite the changes to some staging dates, the Government is pushing ahead with compulsory auto enrolment of employees into a workplace pension, with significant responsibilities falling on employers.

In the latest in our series on these changes, we consider the implications of this for you and your business.

First, employers will have to choose a pension scheme. This could be an existing scheme, a National Employment Savings Trust (NEST) or one set up with a pension provider. There will be information available from The Pensions Regulator later this year, to help companies make this decision, but the Regulator’s role is to inform only, not to advise which option is best for your firm.

You must ensure the chosen scheme meets the specific criteria set out in legislation. Employers will need to assess their workforce to see what their duties will be in relation to each of their workers, and provide employees with information, in writing, specific to their circumstances about how the changes will affect them.

There will inevitably be questions raised after such communication: 

• What if I already have a pension?
• I can’t afford to contribute, what should I do?
• Will my pension be safe?

Any employee’s decision to opt out of a scheme should be taken freely and without influence by their employer and you may be asked to demonstrate this.

Workplace pension reform can seem a confusing subject, full of complicated rules, and while the stated government policy is that employers should “not need advice” all employers should give consideration as to whether they can meet the requirements alone.

The reforms may require a dedicated manager to deal with the initial obligations, and then ensure the duty to provide the right information to the right individual at the right time is fulfilled.

For those employers who feel that their time is better spent running their company rather than researching pensions, the pension changes allow an Independent Financial Adviser (IFA) to provide information on the firm’s behalf. While the responsibility for accuracy of information remains with the employer, an IFA can advise on the best pension scheme for your firm, and answer your employees’ questions, avoiding any potential conflict of interest regarding opting-out.

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