16 pensions & auto-enrolment


By now, all employers should be aware of auto-enrolment


The media spotlight is firmly on pensions at the moment, albeit largely for the wrong reasons, writes Symon Rowley, pensions director, Pitmans LLP


Retirement arrangements for workers at both BHS and Tata Steel seem to be the focal point.


In particular the very real prospect that loyal staff are not going to receive the level of pension that;


i) they have been promised;


ii) around which they have planned; and iii) to which they are entitled.


But both the BHS and Tata-related issues arise from the underfunding of legacy defined benefit schemes.


Here a pensioner’s pay-out is based on their salary at retirement, and, for a variety of commercial reasons, such schemes are now firmly consigned to the history books.


Only around one in 10 of the UK’s circa 6,000 DB scheme is currently open to new members and over 50% no longer allow current members to accrue additional benefits.


While funding issues are likely to haunt employers and trustees for some time to come, defined contribution, or money purchase, schemes are very much the present and indeed the future.


The Government first voiced concern over the nation’s retirement planning, or indeed lack of it, back in 2008.


Fast forward eight years and all employers should be aware of their new pensions obligations, with the vast majority already under a duty to comply with legislation that came into force in 2012.


This legislation will shortly require all UK employers to automatically enrol eligible workers in an occupational pension scheme and, quite simply, the requirement is that a minimum level of contribution is made.


The burden of this contribution is businessmag.co.uk


shared between the employer and the worker with the minimum level set to increase on a sliding scale over the next few years.


Workers can of course opt-out of a scheme, but the hope is that the lion's share will remain opted in.


An employer’s staging date, ie the date by which they are required to be compliant, is determined by the number of employees.


All large and medium-sized employers who haven’t by now gone through the auto-enrolment process will be in breach of the legislation, and by September 2018 all employers must be compliant whatever their size.


Largely the auto-enrolment process has been heralded as a success.


As of September 2015, 5.47 million eligible workers had been automatically enrolled by over 60,000 employers.


However, there is some concern relating to the regulation of the schemes that are being used by employers to fulfil their requirements.


Master trusts, including the Government’s own NEST scheme, are set up as purpose-made vehicles to centrally manage funds for several (or indeed more) employers at once.


While they are not a new concept, since the introduction of auto- enrolment, the popularity of such trusts has risen no end.


However, despite The Pensions Regulator initially encouraging their use, master trusts remain largely unregulated.


This has led the Department of Work and Pensions to call for more stringent regulation in the face of fears that workers face losing their retirement savings if a master trust were to fail.


THE BUSINESS MAGAZINE – THAMES VALLEY – JULY/AUGUST 2016


Hot on the tails of the Queen’s speech in May, the Government announced a new Pensions Bill which aims to alleviate the potential pitfalls of master trusts through the introduction of “strict new criteria” for their framework and by affording The Pensions Regulator additional powers to “authorise and supervise these schemes and take action when necessary”.


Seemingly master trusts will face an increased amount of red tape in order to better protect the security of Britain’s workforce.


Specific details have yet to be provided, although the Government has suggested that it will consult with the pensions industry at large on a variety of issues.


The exact scope of this consultation is also currently unknown, but employers should be sure to keep an eye out for future developments.


Symon Rowley 0118-9570301 srowley@pitmans.com pitmans.com


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