The government has confirmed that all British businesses, whatever their size, will be expected to offer employees the chance to join a workplace pension scheme. The new scheme will start, as expected, in 2012, and all employers will need to play a part by September 2016.

Employers with fewer than 50 members of staff can, if they wish, use a
state-sponsored scheme – the National Employment Savings Trust (Nest) – rather than establish a workplace pension scheme of their own.

Under the new rules, all employers will be expected to provide a pension scheme for employees aged 22 or more and currently earning more than £7,475 a year, which is the threshold for the personal income tax allowance as from April 2011. Where the employer does not provide such a scheme, employees must be enrolled automatically into Nest.

Initially, the largest employers will have to sign up first; the smallest firms will not be obliged to join until September 2016. Employer and employee contributions will also be introduced on a phased basis.

Until October 2016, the minimum overall level of contributions will be 2 per cent, with 1 per cent being made by employers. From October 2016 to September 2017, the total contributions will be 5 per cent, with 2 per cent being made by employers.

From October 2017, the total minimum contribution level will be 8 per cent, with employers paying in a minimum of 3 per cent of annual earnings, employees 4 per cent and 1 per cent coming in tax relief from the government.

Here are 5 steps for employers to consider as the reform deadline approaches:

1. Budget now — so that bigger pension contributions will not mean a sudden rise in costs.

2. Consider the impact on retaining and recruiting employees — What do you want your pension to say about your organisation? Consider how you want your pension scheme to fit in with your overall benefits package.

3. Does your existing scheme meet the Government's requirements?

4. How will you communicate the changes? - It is important to try to engage
employees with their pension, and consultation is key.

5. Prepare now — Beginning sooner, rather than later, will enable changes to be broken down into smaller, more manageable tasks rather than waiting for the Pensions Regulator to begin contacting employers directly, which it is scheduled to do from 2012.

If you need advice on on pension schemes please contact Lisa Loonan at Payroll Solutions on 0161 796 0477 or visit www.payrollsolutionsltd.com