What changes do UK businesses face due to the governments new pension laws?

October 3, 2012 | by | 0 Comments
All businesses must adhere to the Government's new pensions legislation

All businesses must adhere to the Government’s new pensions legislation

The government’s new pension laws come into play this month, meaning that businesses of all sizes will need to prepare for all of the requirements laid out by ‘auto enrolment’.

Auto enrolment is the name for the new pension legislation that has been in the offing since the Pensions Act 2008.

The significant point about pensions auto enrolment is how drastically removed from other initiatives it is; auto enrolment is enshrined in law and forces all employers to enrol all eligible candidates into a scheme that meets a minimum set of criteria.

Finally it means all businesses of all sizes will need to make some kind of formal pension provision.

The UK has an ageing population with the over 60’s set to grow by 40 per cent over the next 30 years.

Allie this with the fact that only 3 out of 10 private companies currently provide an occupational pension scheme and it becomes clear why the government had to act to stop an impending crisis.

The urgency of the need for a plan like auto enrolment seems clear but the thing that’ll represent more of a worry, for many small business holders in particular, is just how they’ll be able to meet the legislation which is naturally complicated in nature.

Requirements for employers to make minimum contributions of one per cent in 2012 rising to three per cent in 2017 could become a red tape headache

Requirements for employers to make minimum contributions of one per cent in 2012 rising to three per cent in 2017 could become a red tape headache

Small businesses often rightly complain of excessive red tape, and without any grand Human Resources teams in place pension provision could prove to be a complicated and badly fitting demand.

The initial concern from a business perspective might be just how much the provision will cost. Minimum employer contributions will begin at one per cent in 2012 rising to three per cent in 2017, but the scheme an employer puts in place is entirely down to their discretion.

Some employers will spot the opportunity to incentivise their staff with generous private occupational schemes, whereas others may feel the necessity to opt for a minimal NEST scheme – NEST being the institution approved by the government as go-to provider for those reluctant to venture into the private pensions provision market.

Roll out for auto enrolment will begin with the largest companies this year and end with the smallest in 2017. The Pensions Regulator will write to companies individually to inform them of their staging date. Prior preparation for auto enrolment is firmly advised.

Category: Business

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