...which will satisfy as yet unknown exemption criteria it looks like an employers key requirements from 2012 will be to:

• Auto-enrol all jobholders in a pension scheme if they are aged between 22 and state pension age and earn more than £5,035.
• A contribution of 8% band earnings must be paid, with the employer paying at least 3%
• People can opt out of the scheme and, if they do, no contributions need to be made on their behalf, but Employers need to re-enrol employees who opt out at least every three years
• Band earnings are earnings between £5,035 and £33,540 (in 2006/07 earnings terms, but these will have changed by 2012).
• Job holders include temporary staff and contract workers.
• Employers can choose to use a good quality private scheme or a combination of the two to fulfil their responsibilities

For employers who don’t currently offer a pension scheme, the requirement to pay 3% of band earnings for those who don’t opt out will increase business costs. This may be an extra 2% or 2.5% of payroll, given that the first £5,035 (2006/7 figures) of earnings is ignored and depending on how many employees opt out.

UK operate on an opt-in basis where employees need to choose to join their employer’s pension scheme. The switch to automatic enrolment, where people are members unless they actively decide not to be, is likely to see an average take-up increase from around 55% to nearer 80%. And the requirement for a contribution of 8% of band earnings, with at least 3% being paid by the employer, may be higher than in many current schemes. Again an increase in employer costs is likely.

Although these personal accounts do not become law until 2012 we are advising all our clients who are employers to commence discussions with us to see how best we can prepare for this fundamental change. (Go back one page...) (Go back two pages...)