The Department of Work and Pensions has released the above document – 17 pages of it. The Pensions Act 2008 set this scheme up but this is the first basic document that has been released, setting the scheme out in words of one syllable. This is going to happen and it is going to cost every employer an increasing percentage of their staff’s salary over the years plus additional time and admin.
Sue (one of our Directors) attended a meeting in London with the Minister of State for Pensions along with some rather more influential concerned parties, such as the directors of the BA scheme, Orange, B & Q and Tesco’s. Heads of major brokers were also there plus one FSB employee. The vested interests wanted to know what amendments would be required for their existing arrangements but the FSB is worried about the impact on very small businesses, employment and the Black Economy. The Government is keen to promote NEST – the National Employment Savings Trust Corporation which will be a “pension provider” available to everyone, but our enquires show that no company has yet been formally appointed as most are not interested in taking it on as the profits they can take are minimal. It appears that the Swedish company that runs the state scheme and the Indian car manufacturer, Tata, are interested.
Sue tried to get across that insufficient information has been supplied for small businesses and the Minister and brokers agreed that education is key. When the Construction Industry Scheme underwent radical changes, it was left to the accountancy profession to educate their clients but with this new pension law, we are not licensed to do this and most IFA’s wouldn’t be interested as they will not earn sufficient returns on the time it will take to set up dozens of small schemes. She has followed up the meeting with a letter to the Minister and we hope we get a positive reply.
At the moment, we are talking to various people to try and source schemes that we would be happy with as we shall have to set up a scheme, but as yet the Government hasn’t said which existing arrangements will fit their criteria. We shall arrange a seminar for anyone who is interested as soon as we get some firm information but please be aware this concerns all employers, including directors / owners with only themselves on the payroll. On the plus side, it is tax-deductible but it will cost employers and staff.
These arrangements will be phased in with the large companies expected to comply next year with smaller businesses being phased in up to 2016 by when every employer will have to comply. Some very small businesses will have to enrol by March 2014, depending on their PAYE reference number – we shall have to check out who this will affect although the document does state that The Pension Regulator will inform all employers 12 months before their compliance date.
As an update to the above, the recent protests by Public Sector Workers about changes to their pension schemes and retirement age is hiding the fact that private sector workers will be much harder hit by the new regime being introduced. It also means that a great deal of Government time is being taken up by these larger pension schemes so there is insufficient time to “educate” small employers. As with the changes to the Construction Industry Scheme, as we feared, the onus of informing those going to be affected is being pushed on to their advisers. We have just received a letter from The Pensions Regulator suggesting that we might like to inform our clients about the changes. We can certainly try but if you do receive any correspondence from The Pensions Regulator, don’t ignore it – again there will be heavy penalties for non-compliance. There are information sheets on the Department for Work & Pensions website and some are quite clear, but it is just going to be more red tape and more costs? We will have to wait and see......
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