Pensions Act 2008

Compulsory pension provision.

The pensions Act 2008 has finally received Royal Assent, and now paves the way for a new Government sponsored pension scheme.

Personal Accounts, as they are currently being called, are to be introduced in 2012. At the same time, employers will need to automatically enrol their staff in a pension scheme, and pay a 3% contribution for those who remain members.

The days of the "empty Stakeholder box" on the shelf will be over.

The Key Requirements from 2012 will be :-

Employers must auto-enrol all employees in a pension scheme:-

• if they are aged over 22 and have not reached state pension age, and
• earn more than £5035

A minimum contribution of 8% of "Band Earnings" must be paid, with a minimum of 3% being paid by the employer.

Band Earnings are earnings between £5035 and £33,540 (2006/7 earnings terms).

Contributions can be phased in as follows:

Individuals will have the ability to opt out of Personal Accounts, but, Employers will need to re-enrol at least once every three years, any individual who has opted out.

Employers can choose to use their own scheme in preference to Personal accounts, provided that it meets minimum standards.

Find out more here

What do you need to do?

This will depend upon on the current level of pension provision that you offer your employees, and also the current take up rate.

There will be cost implications, not just in funding the pension contributions, but also  internal monitoring, administration, contracts of employment, to name but a few.

Although 2012 may seem some way off, provision for the additional costs should be factored in to your business plans.

Our Role

We will continue to keep you updated on the legislation as it evolves.

We will look how Personal Accounts and compulsory contributions will impact on your business as the months go by, the potential implications, and ways to offset costs to avoid "the big hit".

Meanwhile there is no need to panic or take immediate action.