Workplace pensions law is changing and eventually over one million employers of all shapes and sizes will be affected. For the first time, employers in both the public and private sectors will be required to enrol certain staff in a pension scheme and contribute on their behalf.
Large employers have gone first, in 2012 and 2013, but eventually all employers will have to comply with the new laws on enrolment, contributions and employee communications.
Preparations have been ongoing for several years in the pensions industry as employers approach their staging date. Our research has shown that the majority of large organisations in the public sector will turn to pension providers and administrators for support and guidance on their duties, with half also contacting their payroll provider for help.
We are focusing our efforts on making it as easy as possible for local government employers to comply with the new laws. This support will take different forms depending on the size and type of the employer, and is being undertaken in conjunction with organisations like the Local Government Pensions Scheme, the Teacher’s Pension Association and individual local councils.
First and foremost, it’s important for local government employers to understand when automatic enrolment will affect them. The requirements are staged over time, depending on size, with the largest organisations starting from October 2012 and the very smallest employers not becoming subject to these changes until June 2015.
Employers should not underestimate the preparation time needed to implement the changes necessary to fulfil the new duties. Our research into public sector employers suggests that one-in-five believe it will take one to two weeks to prepare for automatic enrolment, while a further 45% do not know how long it will take.
Based on what we’ve seen so far, we estimate that it will take the average large employer about 18 months to plan and get ready, including making the necessary adjustments to processes and systems like payroll, HR and pensions. Leaving it as late as possible runs the risk of making preparations more costly and complex.
Employers can find out their staging date on the Pension Regulator’s website.
While some public sector employers may already operate a form of automatic enrolment, employers will need to check that this is compliant with the new laws and that the scheme into which they enrol workers is ‘qualifying’. For example, employees must not be required to sign a form or give agreement to be enrolled into the scheme. They will be able to opt-out of the scheme once they are a member, but joining must be automatic.
The Pensions Regulator’s role is to help every employer comply with their new duties. We aim to create a pro-compliance culture, where employers understand that the law is being applied fairly and that employers will face penalties for wilful or persistent non-compliance.
Our straightforward interactive online tools cover what an employer needs to do, when, and how much they will need to contribute. And these sit alongside introductory guides for small employers, a series of detailed guides to the reforms for larger employers, and guidance for payroll providers. All of these materials are available on our website.
Charles Counsell is executive director for employer compliance at The Pensions Regulator