Browse by Category

News

Features

LPG Industry

Magazine

Pension Auto-enrolment Due for Lp Gas Industry

With the law on auto-enrolment pensions due to take effect later this year, Mike Jenkins, business development manager at Welplan, examines the provisions and implications for employers and employees and what action should be taken now.

The Government estimates that around 7 million people are not saving enough to give themselves the retirement income they want, expect or need. Automatic enrolment is part of the Pensions Act 2008, which established new duties on employers to increase employee participation in saving for retirement.

The auto-enrolment rule will affect every company in the UK lpg industry with one or more employees. From October 2012, employers will be required by law to automatically enrol all eligible jobholders – those workers aged between 22 and the state pension age (SPA) earning more than the minimum salary threshold (currently £7,475 per annum) – into a qualifying workplace pension scheme and make an employer contribution towards it.

For the first time, automatic enrolment has been set as the default, with the option for employees to opt out. This means that businesses must have a system in place to automatically enrol all their eligible workers.

In addition, this system must be a rolling system, automatically identifying when jobholders become eligible, either through new employment, a change in age or a wage increase. Any employees who opt out of the scheme must be automatically re-enrolled at three yearly intervals linked to the company staging date, unless they opt out again or have opted out within the previous 12 months.

Time is of the essence. Employers need to begin assessing and readying their systems now.

Each employer will be given a specific date to comply with the new regulations, dependent on the number of employees. This extended timeframe is known as staging and will give employers time to prepare and have procedures in place.

Originally, auto-enrolment was due to take place over a total period of four years. However, in November 2011, the Chancellor announced a delay in implementing the requirements by up to 12 months for small businesses – those with less than 50 employees – until after the next election.

A delay in the end date for transitional contributions was also declared, from 2017 until 2018. Currently, we were awaiting confirmation of the new dates from the Government.

The largest employers will be staged in first, followed by medium then small employers. Their staging dates will be triggered by their Pay As You Earn (PAYE) schemes. The first staging date is currently 1 October 2012 for companies with 120,000 or more workers.

The pensions regulator will write to all employers around 12 months before their staging date so they know when to automatically enrol their eligible workers. Three months before the staging date, the regulator will write again to remind the employer of their new legal requirements and the need to register.

But waiting to receive the notification before taking action may not leave enough time to find the most appropriate scheme for your business. Now is the time to prepare!

The Pensions Act 2008 states that, from the business’ staging date, employers will be required to contribute to the company pension scheme a minimum of one per cent of the eligible jobholders’ qualifying earnings. The qualifying earnings band between which contributions will be made is currently £7,225 and £42,475 per year of total earnings.

Minimum contributions will be gradually increased throughout the staging period, rising to three per cent in 2018.

Many businesses are grossly underestimating the workload and the potential cost implications of the new legislation. The impact could be huge if preparations are not made now to accommodate the costs involved in auto-enrolment and contributions. In particular, for employers where pension participation is low, the increased cost of pension provision and contributions is likely to have a dramatic impact on remuneration models and profitability.

Charles Cotton, reward adviser at the Chartered Institute of Personnel and Development (CIPD), has said that taking a proactive rather than reactive approach to preparing for auto-enrolment will enable organisations to be better placed to phase in any potential cost impact.

The next step is to assess the suitability of any existing pension arrangements and select the right solution for your business and employees to enable you to meet your new statutory pension obligations.

The Government has set up the National Employment Savings Trust (NEST) to assist businesses with auto-enrolment compliance. However, NEST is a new, off the shelf scheme with limited experience to draw upon.

A reliable and experienced qualifying scheme, either run in-house or by another provider, may better suit your business needs. Welplan Pensions is a qualifying pension scheme that has been providing pensions for the building services industry since 1988. Welplan Pensions takes care of auto-enrolment and re-enrolment, offering a company-wide pension scheme for both operatives and clerical staff, and providing advice and support through a dedicated helpline.

Contact Welplan on 08001 958080 www.welplan.co.uk

You must be logged in to post a comment.