Workplace pension reform

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All employers need to be aware of their responsibilities following the introduction of pension reforms. Some elements of this new legislation, such as the safeguards for individuals, came into effect for all employers from 1 July 2012.

 

The Pensions Regulator has issued “Getting Ready” notes for employers and this can be downloaded as a PDF document at http://www.thepensionsregulator.gov.uk/docs/pensions-reform-getting-ready-v4_1.pdf.

 

This article summarises some of the key points.

 

• Employers should find out the staging date from which the new auto enrolment regulations apply to their business.

• Employers will need to familiarise themselves with the duties they are likely to have to comply with. These could include: deciding on a pension scheme to use, preparing data to send to scheme administrators, preparing information to send to employees, and setting up payroll processes.

 

Staging Dates

 

1. Employers with 250 or more employees will be staged between October 2012 and February 2014.

2. Employers with 50 to 249 employees will be staged between 1 April 2014 and 1 April 2015.

3. Employers with less than 50 employees will be staged between 1 June 2015 and 1 April 2017.

4. New employers setting up a business from 1 April 2012 up to and including 30 September 2017 will have staging dates between 1 May 2017 and 1 February 2018.

 

In certain circumstances small employers (employers with less than 50 employees at 1 April 2012) can elect to move their staging date to a later modified date. These modified dates are published in the PDF linked earlier in this article.

 

The Pensions Regulator will be writing to each employer 12 months and 3 months ahead of their staging date.

 

Pension contributions protect your fund

From the 5 April 2012 the most you can accumulate in a pension fund will fall from £1.8m to £1.5m – the so-called lifetime allowance.
HMRC have now agreed draft legislation to protect your position if your fund exceeded, or was expected to exceed £1.5m at 5 April 2011.
The proposed protection scheme, known as ‘fixed protection’, is designed to benefit individuals with pension savings that are already in excess of £1.5 million, or individuals who believe that their pension savings will exceed £1.5 million (by virtue of investment growth only, without making any additional contributions) by the time that they come to take their benefits.
Fixed protection will protect all pension savings up to £1.8 million from the lifetime allowance charge. In effect individuals will be in the same position as they were before these changes. However, fixed protection will only continue to apply where an individual makes no further contributions to any existing defined contribution schemes, or receives no increase in benefit under a defined benefit arrangement above a set level. No new pension arrangements are able to be opened either, unless they are only to receive a transfer of rights.
Fixed protection must be applied for by 5 April 2012, and once given, you will be responsible for advising HMRC if you cease to meet the relevant conditions.
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