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Devon Life Business & Professional - Talks Pension Reform

PUBLISHED: 11:29 22 November 2012 | UPDATED: 22:25 20 February 2013

Devon Life Business & Professional - Talks Pension Reform

Devon Life Business & Professional - Talks Pension Reform

Compulsory workplace pension schemes are on the way for us all and according to research from a leading finance firm, over half the workforce is in the dark.

Devon Life Business & Professional - Talks Pension Reform


Compulsory workplace pension schemes are on the way for us all and according to research from a leading finance firm, over half the workforce is in the dark.
The largest employers in the country are already auto-enrolling their employees under new legislation which came into force on October 1st. The rest are required to follow over the next five years, causing a headache for smaller companies which make up the majority of Devons economy.
I spoke to local Pensions expert and Director of Mazars employee benefits, Tim Gillingham who warned that that reforms will hit us all soon enough and we should be prepared.


From October of this year companies employing more than 120,000 people will have to comply with new regulations first set out in the Pensions Act of 2008, and auto enrol all their employees into an accrued pension scheme. Smaller businesses have more time but by 2018 all employers will have to comply. Its because in the UK in particular we have an ageing workforce and fewer people working. Over the years successive Governments have tried and failed to encourage people to make their own provision by taking out a pension or saving via their employers plan. The Conservatives introduced stakeholder pensions in 2000 which provided the vehicle for employees to save through their employers but the take up of those schemes was very poor so this is the latest attempt to encourage people to save for their retirement in conjunction with their employer.


It is important. People need to understand what little the state will provide. The state pension age has already increased from 65 to 66 in 2020 and that may increase again in future years. More and more people will be retiring with little or no income and relying on the state so it is vital that people know the importance of making their own provision.


Here weve seen employers not setting up pension plans or proving other benefits. Theyve taken the view that people have a job, they have a salary and they live in a very nice place and there is less competition for staff so they have just provided the bare minimum. However, that will change as new employers come down to the South West and the market place becomes more competitive. Employers will have to look a bit more closely at providing benefits, and pensions are often the most important benefit and this new legislation goes hand in hand with that.


Mainly, a lack of local specialist support. Most of the advisers that are based in the South West now provide wealth management services to high net worth retired individuals. Corporate specialists that were based in the South West have moved back to London or moved to Bristol . So to get the knowledge and experience employers are going to have to pay high rates and travel. The removal of commission will also be an issue. Under current FSA regulations, if we set up a pension scheme then we are able to take commission which is payable by the provider, and avoids the need for the employer to pay a fee for our services scheme. After 31st December this year the providers will not be able to pay commission on new schemes so we will have to charge the employers a fee which will add to their costs in addition to the extra pension contributions they will have to pay.


Whilst employers have to automatically enrol, employees can, if they wish opt out and the employer cannot be seen to encourage this. The issue with opting out is that the employer then has to keep that record for three years and re- enrol them again after that time. So, if employees opt out it does create more paperwork for the employer and ultimately they will have to re enrol them again and then we could have the same situation if they opt out. If too many employees opt out the Government could make the schemes compulsory in the future.


For most employers in the South West their staging dates will not be until 2014/15 so employers may think they have plenty of time. In reality the industry view is that there will be a shortage of available advice as most IFAs will not have the specialist knowledge required and providers will suddenly be swamped with new schemes. The advice is simple prepare early. The following are some of the steps you will need to take:


  1. Find an advisory firm to help you develop a strategy

  2. Confirm your staging date (the date you need to auto enrol workers)

  3. Review your existing scheme if you have one and identify your staff take up rate

  4. Categorise your workers as you may have to enrol workers who you would have previously excluded eg hourly/weekly paid

  5. Identify the potential increased costs of pension provision

  6. Agree a strategy and identify the pension scheme you will be using for future

  7. Start communicating with your workforce

About Mazars Financial Planning Ltd.

Mazars Financial Planning is a leading, purely fee based, Independent Financial Adviser (IFA). It provides a full range of financial planning services, from financial health checks to advice about investments, pensions, tax planning and employee benefits. It is wholly owned by Mazars LLP.

Tim Gillingham | Director, Mazars Employee Benefits, Tower Bridge House, St Katharines Way E1W 1DD T:+44 (0)207 063 4000 / M:+44 (0)7881 283311

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