The imminent introduction of the requirement for companies to enrol staff on a pension scheme is in danger of catching some HR departments under-prepared warns Fidelius, a firm of leading employee benefit specialists.
Fidelius is advising HR professionals that the introduction of auto-enrolment on October 1, 2012 requires rigorous planning, with a host of new obligations about to fall on employers’ shoulders. Employers will be legally required to automatically enrol eligible job holders into qualifying workplace pension schemes and make minimum contributions, unless a staff member opts out within a one-month window.
While only the UK’s largest companies – those that employ 120,000 people or more – will be obliged to auto-enrol from October 1, all companies will be phased into the new pensions regime over the following five years. Those who earn more than £8,105 a year and who are at least 22 years old but below state pension age will have to be automatically enrolled onto an eligible scheme.
Iain Fox, co-founder of Fidelius, which has offices in Bath, London, Cheltenham and Exeter, said: “These are new responsibilities for HR departments and it is critical that companies are up to speed with these fundamental changes to the UK pensions system. Responsibility for complying with auto-enrolment rests squarely with the employer. As the Pensions Regulator has pointed out, even those companies which currently have a scheme for their employees will still have new requirements to meet. It is vital HR managers are up to speed.
“We are urging businesses not to leave auto-enrolment to the last minute, since apart from the potential of receiving hefty fines, there are also many aspects of the scheme which require comprehensive administration. If obligations relating to auto-enrolment are not complied with, then the regulator has a host of sanctions at its disposal, from fixed penalty notices to – in the most serious cases – court action. Qualifying schemes are defined contribution schemes and defined benefit or hybrid schemes.”
Another aspect of the scheme that will also be phased in is the level of minimum contributions that employers will have to make; contributions will start at 1% of a given employee’s salary but are set to rise to 3% by 2018.
Auto-enrolment is intended to make the process of saving for their retirement more straightforward for employees. Currently, many workers miss out on valuable pension benefits because they do not sign up to a scheme run by their employer. Iain Fox added: “Auto-enrolment is designed to plug the savings gap caused by apathy and lack of early planning for retirement, and in some cases, not saving at all. It is an ambitious programme and represents a sea-change in pension policy. HR departments should act now to ensure they are not overwhelmed by an administrative headache further down the line.”