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New government legislation will be introduced from 2012 and is highly likely to increase costs for most employers. They will be forced to pay up to 3% of the wages of the majority of their employees into a company pension scheme. This is only one of several issues that will affect costs because of the reporting procedures which must also be brought into effect from the same date. Each business pension scheme must report to The Pension Regulator in order to show that all qualifying members of staff have been auto enrolled into a valid company pension fund. If employees decide to opt out then this also needs to be reported. All fund members will also need to contribute a small percentage of their salary so this needs to be reported as well. All qualified employees who do decide to opt out must continue to be auto-enrolled again 3 years later and given another chance to opt out. If companies do not comply with this legislation then penalties can be imposed, which can run as high as £10,000 per day.
Employers could use a company pension scheme managed by a traditional life office such as AVIVA, Scottish Widows or Standard Life. On the other hand they could decide to use a government funded alternative called NEST (National Employment Savings Trust) which has been introduced to provide companies with a fall back situation if they have not put a plan into place and for any reason choose not to set one up with a life office. There are good reasons to research these alternatives carefully and this decision should not be taken without the assistance of a qualified independent professional. It is vital to choose a suitable plan for your company from the beginning because if the scheme you choose does not continue to meet your needs over many years ahead then it would cause unnecessary costs and administration work to move to another.
Assessing your choices now is advisable, even if your company staging date does not insist you start for a few years. It is worth being prepared for a future of business pension plans.
