a call to action
“I do not believe that the pensions industry has fully kept
pace with developments in the marketplace. The fact is that
only a third of the UK adult population has made provision for
an additional private sector pension on top of the state
provision. It is essential that the proportion should increase,
and a framework of legislation has been put in place to help
achieve that objective.”
Changes taking effect in 2012
opportunity for employers to enrol staff into
the highest quality pension scheme, and use
Core to those provisions are the Pensions Acts this as a vehicle for attracting the best staff.
of 2007 and 2008. The second of those intro- The reforms should therefore prompt employ-
duced measures to encourage greater private ers into thinking carefully about what they of-
saving. Most of the provisions in that Act will fer in that respect.”
come into effect from 2012 – rather less than
two years from now.
In terms of your responsibilities as an em-
Details to be finalised
ployer, the Act imposes on you a duty to enrol Some of the finer points of the new measures
all eligible workers who are not already mem- still have to be finalised and written into sec-
bers of a good quality workplace pension into ondary legislation when the rounds of consul-
such a scheme wherever possible, and make tation are complete.
at least a minimum contribution in respect of One of the issues to be determined is the
each person involved. extent to which the value of a Personal Ac-
The same Act also allows for the establish- count can be migrated subsequently to a more
ment of Personal Accounts, a pensions sav- conventional private pension scheme. Angela
ings vehicle aimed at those currently without Eagle maintains that it is not clear what the
access to a workplace pension scheme. It will demand will be for this level of portability.
broaden the remit of the Personal Accounts Could the cap of £3,600 on contributions to
Delivery Authority to establish the infrastruc- Personal Accounts each year prompt a migra-
ture for the Personal Account scheme. tion from the scheme into more conventional
According to the Minister, Personal Ac- private pensions or new products which the
counts will give around nine million people sector is understood to be developing?
the chance of saving in what is intended to be Given that the target for the new provision is
a low-cost, low-administration scheme to the medium to low earner, the Minister does
which the employer and government make not expect this limit on investment to be a
guaranteed contributions. major consideration. “The employer’s contri-
There is a real incentive, she believes, for bution will be a minimum of 3% - though it
the pensions industry to raise its game. “If we can be a greater proportion.
get these reforms right, there will be competi- “With the employee’s contribution, and the
tion to provide retirement packages in the me- government allowing tax relief on those sums,
dium to low earners bracket. They will shift a Personal Account will represent a minimum
people’s view towards longer term saving and of 8% of salary. And staff can make further con-
move the culture away from one of sudden tributions up to the £3,600 limit.
cliff edge retirement; often with a high de- “I believe that there will be sufficient flex-
pendency on state provision, ibility in the numbers involved to encourage
“This should not be viewed as an imposi- further saving without having to find other
tion on the business community. It will be an avenues.”
The Act requires you to enrol all eligible workers who are not already members of a good quality workplace
pension into such a scheme and make at least a minimum contribution in respect of each person involved.
The Informed Executive
41
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