The pensions landscape will be unrecognisable following the introduction of new legislation from October 2012 which will require employers to automatically enrol eligible jobholders into a pension scheme.
The new duties will apply to all employers in Great Britain and will be phased in over a five year period starting on 1 October 2012. The largest employers will be required to implement the new arrangements first.
From the date the relevant employer’s duties apply, the employer must arrange for all eligible “jobholders” to be automatically enrolled into a qualifying pension scheme. The employer can use an existing occupational or personal pension scheme provided it meets certain requirements. Alternatively, the employer may choose to enrol “jobholders” into the National Employment Savings Trust (NEST), a government-established scheme.
One of the requirements of a qualifying pension scheme is that no new joiner may be asked to make a choice or provide any information in order to join the scheme as an active member. That means that sufficient information required to enrol new joiners into the scheme will have to be obtained as part of the general recruitment process. Furthermore, the relevant pension scheme must have a default investment fund as employees will not be able to make investment choices until after they are in the scheme.
Once enrolled, the employer will be obliged to pay mandatory minimum contributions into the pension scheme or, when dealing with a final salary scheme, offer a minimum level of benefits. The level of minimum contributions or benefits will also be phased in.