Consultation recently closed on the latest in a series of papers dealing with the personal accounts and automatic enrolment reforms - 'Workplace Pension Reform - Completing the Picture'. The document gives a fairly detailed picture of how the reforms are designed to work and how to start preparing for 2012. But what are the headline issues for employers? Pensions and legal expert Alison Cribbs runs through them.
Although the new obligations will be launched in October 2012 as previously announced, the intention is now to 'stage' implementation over a three-year period. The plan is to introduce the requirements for large and medium-sized employers over the first year, with small and micro-employers being brought in over the following two years. Given that larger employers are most likely to be geared up for the reforms, this seems a sensible way to deal with the practical aspects of bringing large numbers of employers within the regime.
In recognition of the costs of the new requirements, the principle of staging has been extended to the payment of contributions. The proposal is to phase in minimum contribution requirements over time to help employers and individuals adjust to the additional costs gradually. The minimum contribution for a qualifying defined contribution arrangement will not reach the long-term level of 8% (of which at least 3% must relate to employer contributions) until October 2016, with 2% being required from October 2012 and 5% from October 2015. On the basis that it is not possible to phase in contributions for defined benefit schemes, the proposal is to allow employers using defined benefit schemes to delay automatic enrolment until the staging period has ended. These allowances are likely to be welcomed by employers to allow them time to adjust to the new requirements.
A further protective mechanism is proposed in relation to scheme closures, so that employers that close their scheme before the end of the transitional pe