Pension Reform

The changes mean that employers will have to automatically enrol certain workers to a pension scheme and make contributions on their behalf.

The new legislation was due to start in 2012, and was planned to be introduced in stages over 4 years. However, The Government announced in 2011 that they wished to re-look at the implementation dates (“staging dates”) within the pension automatic enrolment timetable.

The staging date is based on the number of people in an employer's PAYE scheme, you can find your relevant date on the attached timetable. The Pensions Regulator will send employers full information 18, 12 and six months before their staging date. David Graham, Director of Independent Financial Advisers, Finance Matters (NI) Ltd outlined some of the actions required of all employers (Source: Legal Island 2012):

* Pensions Audit - check what you need in terms of pension scheme in relation to what you may already have in place and whether any existing scheme can be utilised in the future to fulfil your obligations.

* Business Planning - each firm needs to budget & plan for the direct pension costs, plus the time & the responsibility involved complying with the various employer duties.

* Employment provisions -  you may need to review employment contract terms & conditions, staff handbook etc.

* Registration with the Pensions Regulator

* Assessment of various categories of employee – this needs to take place, as different categories of employee merit different treatment within the rules. There is also a need to continuously assess the eligibility for each employee on an on-going basis and change the employee's "category" according to the reform's rules.

* Information - needs to be provided to employees & records retained to confirm compliance with information provision.

* Pension implementation - you need to actually implement an appropriate pension scheme and automatically enrol the relevant employees.

* Regulatory implementation - you also need to ensure the necessary regulatory assessment & monitoring takes place.

The Pensions Regulator can provide more information on phasing as well as basic information leaflets for employers, and interactive tools that provide the relevant staging date, an overview of employer duties, the process of enrolling workers, and what the minimum employer contribution will be for each person who must be automatically enrolled. Detailed information is in the section for professionals.

Organisations who already provide an occupational pension scheme should confirm whether it is a qualifying scheme, and if not, they will need to consider how it might need to be changed.

For all organisations, advice may be needed on contractual issues, such as whether other employee benefits will need to be reduced in order to cover the costs of the organisation's pension contributions, if this is the case, staff negotiation and agreement may be required and legal advice on the detrimental variation of terms and conditions would be advised. Employees should be made aware of the impact on their salary to cover the cost of their contributions, this could result in further requests to employers for pay increases.

For further information please contact Eamonn McKee [email protected]