The Pensions section of the web site contains:
The Roadmap for Retirement Reform was launched on Thursday 19 April at 116 Pall Mall in association with Capita Hartshead and Lucida. It examines the progress that has been made since the last Roadmap paper, published in 2009, and the barriers that may stand in the way of its implementation.
The 2009 paper argued for reform in three areas. It suggested the need to raise the state pension age towards 70 sooner rather than later. A case was argued for a decent universal and basic state pension, and an end to means-tested retirement income. And the paper questioned whether the current pensions saving system is right for the 21st century, suggesting that a search for a more simple method might begin.
Using research among IoD members, the new paper will identify the parts of the current pensions regime that people find attractive – and those that they don’t. Looking at other findings, it will seek to identify components of a future savings system, which might encourage people to remain focused on their assets, especially those closer to retirement.
In one of the most radical reforms of UK pensions ever, new duties are being placed on employers commencing in October next year and phased in for smaller employers up to 2016.
For the first time, employers of all sizes will be required by law to establish a pension scheme for their employees and automatically enrol them into it after a 3 month waiting period. All employees between the ages of 22 and state retirement age will be eligible. Employers will be required to make contributions to the scheme on behalf of employees, who will also contribute on their own behalf. These contributions will be based on an earnings “band” between around £7500 and £33500 at 2008 values and will eventually be, after a “phasing in” period of lower contributions, 3% from employers, 4% from employees and 1% in tax relief from the government.
Assuming the employee does not “opt out” of the scheme, which they are entitled to do within one month of being enrolled, employers will be required to continue making contributions until state retirement age at least.
Employers will be required to start doing this in “stages”, with the largest employers going in first in October 2012 and micro-employers going in last during 2016. Employers will either need to select a suitable pension scheme from the open market, or they can opt to use the new National Employment Savings Trust (NEST), which has been established by government to provide a pension arrangement to any employer who wishes to use it, no matter how small. Direct private sector competitors to NEST are now entering the market and other providers are expected to enter the market soon. An existing pension scheme could well be suitable for fulfilling the new duties.
What should employers be doing now?
The first thing to do is to check your “staging” date, the date on which you will be expected to start complying. You can find this at http://www.thepensionsregulator.gov.uk/ along with much more detail on how the new laws will work. The second thing to do is to identify how you will go about fulfilling the new duties. Will you use an existing pension scheme or will you use another scheme? Will you contribute just the basic amount or more, to attract high quality staff?
Whatever the answers, action for larger employers is required now.
Malcolm SmallSenior Adviser, Pension Policy
The IoD has joined forces with other organisations and individuals, including the Institute of Economic Affairs, Policy Exchange and a fellow of the Institute of Actuaries, to set up the Public Sector Pensions Commission. The Commission’s terms of reference are to improve transparency and public understanding of public sector pension costs and present to the new Government a realistic set of options for reform of the present public sector pension arrangements. It is increasingly clear that, with ever increasing longevity, reform is necessary to ensure that public sector pensions remain financially sustainable for the long term.
The Commission’s website is www.public-sector-pensions-commission.org.uk
The report of the Public Sector Pensions Commission has now been published. It finds that public sector pensions are worth, on average, at least 40 per cent of salary, warns that contributions may need to rise sharply if benefits remain unchanged and sets out a menu of options for reform. To download the full report, please go to www.public-sector-pensions-commission.org.uk
IoD Policy exists to advance the case for business in Government, the media and other influential areas.
Policy Team