pensions
Prepare early
Businesses are being urged to get ready for the looming pensions revolution. The Business Quarter finds out why...
T
he biggest change to the UK pensions system in a generation will be rolled out next year – affecting every single business in Wales.
Auto-enrolment sounds simple enough,
and in effect means that every working person aged 22 and over and paying tax will have to be signed up by his or her employer into a workplace pension scheme. It’s a revolution which will bring the
country’s pension system screaming and kicking into the 21st century – and, most importantly, provide the majority of the 13 million people in the UK who would have currently retired with just the state pension to survive on, with a viable and valuable second source of income. A similar system was introduced to
the working population of Australia 30 years ago and has since been copied by governments in New Zealand, Canada and Israel with great success. Its launch in the UK next October is not expected to prove popular with employees or employers, but it’s widely accepted among politicians of all persuasions that without it the state pension system will literally go bust. It will not be popular among employees
because they will eventually have to contribute a minimum of four per cent of earnings each month into a scheme. It will be unpopular with employers
because they will face the double whammy of contributing a minimum of three per cent of the value of the employee’s qualifying earnings (including any bonuses, overtime payments etc) plus the headache of having to administer the pension scheme for every single member of his workforce. But - and at this stage, it’s a big ‘but’
– the employee will be given the right to opt out of auto-enrolment (bizarrely, making it not so automatic as it first appears). However, the feeling within the financial
services industry is that this opt-out clause will quickly be withdrawn, making it compulsory for everyone to have an
44 THEbusiness QUARTER
occupational pension. Auto-enrolment goes ‘live’ from October
1, 2012, when all big businesses of 800-plus employees will have to provide a workplace pension scheme to all staff – by law. The following year will see companies with workforces of between 250 and 799 signing up to the new scheme, with businesses of up to 249 staff joining in sometime in 2014. Gerald Davies, managing director of
Newport-based The Kymin Group, said that despite the long trail of auto enrolement there remains worryingly widespread ignorance of its implications. “Employers need to ask themselves if
they are ready or know as much as they ought in readiness for the implementation of legislation relating to compulsory workplace pensions, their duties as an employer and also about NEST, the National Employers Savings Trust. “We’ve been talking to our clients
along with prospective clients about auto enrolement and NEST for more than a year now and so like to think that they are as prepared as they can be for the monumental changes ahead.” And, according to another Gwent-based
financial planning and pensions specialists Seer Green, the penalties for any employer failing to take part will be severe, with daily fines of up to £10,000 a day (depending on the size of business) and up to two years’ imprisonment for the owner of any business who continues to flout the new pension law. Seer Green Director and pensions expert
Siobhan Mail, said: “This is potentially really quite life-changing for businesses of all sizes and we would urge every business owner to sit up and take notice of what is about to affect them – and seek advice early. Smaller businesses certainly have the opportunity to prepare early, particularly financially, and soften the blow.” Siobhan said: “A small business with 25
employees, for example, has until August 2014 to get itself ready for pension auto-
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