Millions of workers moved a step closer to getting a workplace pension for the first time as the final rules for the Government’s pensions reform were put before Parliament on 12th January.
Calling this the most radical change to workplace entitlements since the introduction of the National Minimum Wage, Secretary of State, Yvette Cooper, highlighted the fact that employers of all size would be joining employees in paying into a pension scheme for the first time.
The changes kick off in 2012 starting with the largest businesses of over 120,000 employees paying into a pension scheme from October 2012. Employers will be staged by size from largest to smallest through to 2016, with start up small business given additional time to prepare to comply.
Secretary of State for Work and Pensions, Yvette Cooper said:
“Even during these difficult economic times, employers, industry and unions agreed with us that these reforms were vital in giving millions of people the chance to save in a pension for the first time.
“All employers will be required to pay into a pension for their workers for the first time. We have responded to the concerns of business to make the introduction of these reforms as straightforward as possible. Start-up businesses will be given valuable extra time to prepare for these changes as we come out of recession.
“The cost to all of us of doing nothing in the face of an ageing society is too great to ignore. Currently 14 million people get no contribution from their employer towards a pension and around 7 million people are not saving enough for their retirement.
“These reforms will give everyone the chance to build up a pension. It is the biggest change to support for working people since the introduction of the minimum wage.”
The regulations have increased flexibility and removed some of the burdens that were identified, without compromising the intentions or undermining protection for individuals, such as:
- Start-up businesses created from 2012 will be given until 2016 to start enrolling staff
- Businesses employing 120,000 staff start enrolling in October 2012, with smaller businesses phased in over the next three years
- Phasing in employer contributions from 1% in 2012 to 2% in October 2016 and to the full 3% by 2017.
The regulations reflect small changes to implementation announced in December – designed to help small and start-up businesses through the recession. Auto-enrolment will begin as planned in October 2012 and will be fully phased in by October 2017.
Minister of State for Pensions and the Ageing Society, Angela Eagle, said:
“These landmark reforms, on a scale unprecedented anywhere in the world, will ensure millions of workers on low and moderate incomes will be able to save for their retirement with a guaranteed new minimum contribution from their employer, many for the first time.
“Along with our changes to the State Pension from April, we will ensure pensions are fair and sustainable in the longer term.
“It is essential we get the foundations right and continue to focus on minimising any process burdens on business. With the publication of the regulations today, we take a big step closer to automatic enrolment from 2012, moving from consulting with employers into a phase where we explain in clear and simple terms what their obligations will be.”
The Government’s aim has been to introduce effective regulation without placing unnecessary burdens on employers or the pensions industry. The changes made in response to our consultations introduce increased flexibility and remove some of the burdens that were identified, without compromising our intentions or undermining protection for individuals.
Also published today is the National Employment Savings Trust Corporation Order and the Order to establish the National Employment Savings Trust Corporation and as a consequence, the Order which will wind up the Personal Accounts Delivery Authority in July 2010.
Fact File
- Last week PADA announced that the personal accounts scheme would be named NEST (National Employment Savings Trust).
- More than a million employers will be involved in these reforms, many of them small businesses. The regulations follow changes to implementation announced last month designed to help small and start-up businesses through the recession.
- New measures to provide additional support to new business start-ups, to small and micro businesses, and to individuals unused to pension saving will ensure that we meet both the long-term challenge of ensuring our citizens can have a decent income retirement and the shorter-term challenge of ensuring maximum economic growth as the economy pulls away from the current downturn.ÂÂ
- We have also reformed the State Pension so that is now fairer and more generous, especially to women and carers who gave up work to stay at home to bring up family or care for loved ones. Currently less than half of women retire with a full Basic State Pension, but thanks to our reforms this will rise to 75% in April 2010.
- The number of years needed to qualify for a full State Pension have been reduced to 30 years and we will be making it easier for women to make up any gaps they have in their contribution records. And grandparents will also now earn credit towards a fairer and more generous state pension for looking after their grandchildren.
- The following regulations have been published and are available at www.dwp.gov.uk/workplace-pension-reforms
The Occupational and Personal Pension Schemes (Automatic Enrolment) Regulations 2010
These set out the practical arrangements employers must make to automatically enrol eligible jobholders into a pension scheme, including the arrangements an individual must make if they wish to opt out of pension saving and the minimum quality standards certain schemes must reach in order to be used by employers to automatically enrol jobholders.
The Employers’ Duties (Implementation) Regulations 2010
These set out the arrangements for implementing the new employer duties by applying the duties to employers over a period of time according to the employers’ description.
The Employers’ Duties (Registration and Compliance) Regulations 2010
These enable the Pensions Regulator to monitor and enforce compliance with the employer duties.
The Public Interest Disclosure (Prescribed Persons) Order 2010
This amends an existing order to ensure that any detriment or dismissal a worker suffers as a result of making a complaint to the Pensions Regulator is unlawful.
The Pensions Act 2008 (Commencement No. 5) Order 2010
Establishes the National Employment Savings Trust Corporation from July 2010.
The National Employment Savings Trust Corporation Naming and Financial Year Order 2010
Sets out the name of the trustee corporation which will run the National Employment Savings Trust Scheme.
Sets the financial year of the corporation in line with Government’s financial year – 1 April to 31 March.
The National Employment Savings Trust Pension Scheme Order 2010
Sets up the framework for NEST, a simple low cost scheme which employers can use to discharge their new duty.
The National Employment Savings Trust (Consequential Provisions) Order 2010, and
The Application of Pension Legislation to the National Employment Savings Trust Corporation Regulations 2010
Make some minor modifications to existing pension legislation in relation to the scheme through The National Employment Savings Trust Consequential Provisions Order and The Application of Pension Legislation to the [National Employment Savings Trust Corporation Regulations, for instance, that the scheme will not have member-nominated trustees, as the members’ panel will represent the views of scheme members.
The Transfer Values (Disapplication) Regulations 2010
Bans transfers of cash equivalent sums built up under other pension arrangements into and out of the National Employment Savings Trust scheme, to ensure the scheme complements those schemes already in the existing pensions market.
The Personal Accounts Delivery Authority Winding Up Order 2010
Winds up the Personal Accounts Delivery Authority from July 2010.
Transfers PADA’s property, rights and liabilities in the main to the National Employment Savings Trust Corporation.
Also published today at www.dwp.gov.uk/workplace-pension-reforms
- Workplace pension reform – completing the picture. Government Response to the Consultation
- Workplace pension reform regulations – impact assessment
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