More information is still required about the government’s planned introduction of personal accounts in 2012 as a number of employers have yet to start reviewing their pensions provision.
More than half (55%) of employers polled in the session on ‘Communicating pension and savings benefits to employees’ at the Employee Benefits Summit in Jerez, Spain said they have not yet begun to look at whether changes will be necessary to their organisation’s pensions provision in light of the forthcoming personal accounts, while 69% said that they needed to find out more about the system.
Almost a third (28%) said they were planning to review their pensions over the next 12 months.
Michelle Lewis, senior policy adviser at the National Association of Pension Funds (NAPF), explained that measures contained in the Pensions Bill, which is currently passing through the House of Lords, will mean staff must be automatically enrolled into either a qualifying pension or personal accounts from 2012. Minimum contribution levels will see employers contributing 3% of employees’ earnings, staff contributing 4% and a further 1% being paid in the form of tax relief.
Contributions will be calculated on employees’ total earnings, including salary, bonuses, over-time or commission payments, for example, rather than being solely based on salary.
Lewis added: “The role of the employer is going to be key to the reforms being successful”
Tim Sands, deputy director for National Health Service (NHS) pensions in the Department of Health, explained that the NHS has auto-enrolled staff into its defined benefit pension scheme since 1988, which has resulted in a take up of more than 90%. He said: “We had a very determined focus that we wanted a high-quality pension. Auto-enrolment has been a real benefit [in achieving this].”
But he added that a real challenge for the organisation is that people do not always appreciate the value of the pension. From next year, the NHS plans to introduce annual benefit statements to tackle this.