The bill proposes that from 2012 employers will have to automatically put most of their staff into a pension arrangement and pay contributions on their behalf.  At the same time Personal Accounts will be introduced with employer and employee contributions being phased in over a period of three years.

All employees between 22 and State Pension Age, earning more than £5,035 (as at 2006/07), not in a “good” pension scheme will be automatically enrolled in Personal Accounts.

Employees aged between 16 and 22 can choose to join and, if they do, the employer needs to pay at least the minimum contribution on their behalf.

Individuals can opt out but will be re-enrolled in the scheme every three years.  The current proposal is for employers to pay 3% with employees paying 5%, although this will be reduced by income tax relief. 

Contributions will be based on a band of earnings between £5,035 and £33,500 as at 2006/07 and indexed each year in line with earnings growth that has taken place by April 2012.

2012 seems a long way off – do I need to worry about it now?

April 2012 is more than three years away, but it is a good idea to know now what the impact will be on your business, particularly from a budgetary perspective.

At the moment there is plenty of time to think about changes that might be required in pension provision for your employees and implement a strategy that will be better received by staff and seen as an employer initiative rather than being forced to act because of legislative change.

We can talk you through the proposed changes and how these might impact on your company.  If necessary we can recommend changes that will position you well for the new world of 2012 and, in particular, demonstrate how an alternative to Personal Accounts could be better suited to your staff.

To discuss how we can assist you in relation to you pension requirements, please contact us.