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Auto-enrolment set for October 2012

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UK - Auto-enrolment into occupational pension schemes, including personal accounts, is not expected to begin until October 2012, the Personal Accounts Delivery Authority (PADA) has revealed.

In the prospectus for suppliers wishing to tender for the scheme administration contract for the new system of personal accounts, PADA stated the "personal accounts scheme will need to be fully operational in time for the onset of the employer duties. Our working assumption is that this will be in October 2012".  (See earlier IPE article: PADA targets admin in first tender)

The package of pension reforms outlined in the Pensions Act 2007 and 2008 will require all employers to auto-enrol eligible employees into a qualifying occupational scheme and to contribute 3% of banded earnings, against 4% from the employee and 1% from the government through tax relief.

Although 2012 has always been the target date for the implementation of the reforms, with the assumption that it might begin in April to coincide with the start of the financial year, this is the first time it has been narrowed down to a specific time period.

Paul Macro, a senior consultant at Watson Wyatt, said: "The government cannot introduce the employer duty until there is something for companies without their own pension schemes to auto-enrol people into. It may be that PADA does not think it can get personal accounts up and running until late in 2012."

Alternatively, he suggested the perceived delay in introducing the auto-enrolment requirement might be because the government thinks leaving it late means there is more chance that an economic recovery will be under way, and contributions will then be affordable.

However, Macro warned because of the way both employer and employee contributions are to be phased-in, it would be at least October 2015 before the full 3% employer contribution is made compulsory.

He said: "It's strange that this announcement should be buried in a prospectus document. The date when the new rules kick in will affect every employer in the country, not just suppliers to the personal accounts scheme."

"If the reforms are not introduced until October, employers have a bit more time to plan ahead but the clock is ticking. Companies need to understand sooner rather than later how auto-enrolment will affect their pension costs and what adjustments they will need to make to their pension schemes, added Macro.

Meanwhile a spokesman for PADA said: "October 2012 is the planning assumption provided by the Department for Work and Pensions (DWP) for the most likely date for onset of the roll-out of employer duties and the compliance regime.

"The working assumption of October 2012 has been reached by DWP taking account of the duration of the procurement processes required for both the personal accounts scheme and the compliance regime, the allocation of those contracts, and ensuring that the required systems are in place to ensure a smooth implementation of the programme."

If you have any comments you would like to add to this or any other story, contact Nyree Stewart on + 44 (0)20 7261 4618 or email nyree.stewart@ipe.com

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