Think back nine and a half years…
In December 2002 the then Labour government published a Pensions Green Paper in which it announced the establishment of the Pensions Commission under Lord Turner. The Commission’s task was to ‘look at how the UK pension system was developing over time’ and, based on its findings, make ‘recommendations …. on whether the pension system should move beyond the current voluntary approach’. Over the following three and a half years the Commission issued three reports.
Not quite compulsion…
One of the key points to emerge from the Commission’s first report was the idea of automatic enrolment of individuals into a pension scheme. The proposal had its roots in behavioural economics: once in a scheme, inertia will usually take over and the individual will stay put, even if there is no compulsion to do so.
The second and final reports developed the concept and suggested the creation of a National Pensions Savings Scheme (NPSS) as a default pension arrangement and mandatory employer contributions unless the employee chose to opt out.
A rocky road
The Commission’s final report emerged in April 2006 and since then there has been a steady flow of legislation to bring into being auto-enrolment and the default scheme (now called NEST, having been at one time Personal Accounts). There was a point after the last election when it seemed possible the whole idea would be scrapped. Instead, the coalition government, like its predecessor, eased the cost by extending the period over which auto-enrolment will be introduced while leaving the start date unchanged at 1 October 2012. It will now not be until October 2017 that auto-enrolment is fully in force for all employers and October 2018 before the phasing in of contributions comes to an end.
ACTION
The 1 October 2012 start date for auto-enrolment will only apply to large employers and their employees. Businesses with fewer than 50 employees will not be required to start auto-enrolment until at least mid-2015.
Whether you are an employer or employee, the arrival of auto-enrolment could have important consequences. If you are unsure what it will mean for you, talk to us now.
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