Pensions research: Pensions legislation

Employers are slowly getting ready for the 2012 reforms, says Debbie Lovewell


The Pensions Act 2008 will introduce pensions reforms in October 2012 that include autoenrolment to a qualifying occupational pension plan or personal accounts, and the phasing-in of compulsory employer and staff contributions. The government appears to be slowly convincing some employers of the reforms’ merits.

This year, 10% said they felt the reforms would solve the pensions crisis. This is a jump from the 6% who said so in 2008 and 5% in 2007, but the government still has far to go to convince all employers of the legislation’s worth.

As we move closer to 2012, more employers are finding the reforms will impact on their pension provision. This year, 21% said the reforms would have no impact on their scheme, markedly down from the 50% in 2007 and 62% in 2006. This change is likely to stem from increased understanding of the legislation and its true impact on pension schemes.

Nearly one-third (31%) of respondents have begun to prepare for the reforms. The size of the task means planning is essential if employers are to get a grip on the legislation and how it will affect their pension provision. This does not necessarily mean making changes, but includes reviewing existing schemes to determine what action, if any, is required to comply with the act.


This year’s Budget report contained the announcement that higher-rate tax relief for staff earning more than £150,000 a year will be restricted from April 2011.

The interim anti-forestalling regulations that apply until 2011 inhibit the ability of high-earning employees to tax-effectively increase pension contributions above the average of their last three years’ contributions or £30,000, whichever is smaller.

Under current proposals for the treatment of pensions tax relief from 2011, pensions for employees earning in excess of £150,000 a year are likely to become less tax-effective than alternative, more flexible savings vehicles, such as individual savings accounts (Isas). This has posed a challenge for employers that want to help their higher-earning employees save into a pension scheme in the most tax-efficient manner, which has not been helped by the lack of clarity around the changes.

This may be why 42% of respondents do not know what action they plan to take if the proposed Budget changes come into effect from 2011.

Ensuring employees are aware of, and understand, the changes is crucial. It is therefore encouraging that more than a quarter (28%) of respondents are helping affected employees to understand how they might maximise their tax-effective pensions saving over the next two years.

Click on the links below for more sections:

Pensions research: about the respondents; key findings

Pensions research: Attitudes to pensions

Pensions research: Types of pension scheme offered

Pensions research: Investment strategies

Sponsor’s comment: Pensions become a priority