Towers Watson research: FTSE 100 firms preparing for 2012 pension reforms

The majority of FTSE 100 firms are preparing for the 2012 pension reforms, according to research by Towers Watson.

The annual FTSE 100 Defined Contribution Pension Scheme Survey found that 90% of the FTSE 100 have already considered the impact that changes will have on their businesses and employees.

The survey found that only 8% believe that no changes need to be made to their current arrangements in order to comply with the new requirements. It also shows that many organisations plan to use their existing arrangements, with modifications where necessary, to meet the auto-enrolment criteria.

Only two organisations intend to use the national employment savings trust (Nest) as their main pension scheme for new joiners.

Some 41% already auto-enrol their employees into defined contribution (DC) schemes, and a further 28% state they will change their joining approach as a result of the 2012 pensions reform, but the position of the remaining 31% is unclear.

According to the research, overall DC membership remained unchanged during the last year, with around half of all employees of FTSE 100 organisations being members of a DC pension scheme. However, the number of non-joiners has increased to 23% from 18% the previous year.

From 2012 onwards, these members will be required to join their employer’s nominated qualifying pension scheme.

Paul Macro, senior consultant at Towers Watson, said: “It is heartening to see how many organisations have taken advantage of the increase in detailed information about the regulatory changes from October 2012 onwards and have considered their reaction to the introduction of auto-enrolment and minimum benefit levels.

“But it is alarming to note that almost a quarter of FTSE 100 employees choose not to, or are not eligible to join, their organisation’s pension scheme, particularly in light of the 2012 pensions reforms and auto-enrolment legislation.

“With less than 18 months to go until the phased introduction of the requirement for employers to auto-enrol employees into a qualifying scheme, some employers will need to give serious consideration to their benefit provision.

“They also need to decide whether they will update their scheme design to become a qualifying scheme, use Nest or use a mixture of both these options, which could bring administrative headaches for payroll and HR teams.”

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