Building a strong foundation for the future

Investment Management specialists at BDO LLP in Southampton are urging employers in the region to start planning now to meet their obligations to provide pensions for their staff which come into force in 2012.

Pension auto-enrolment provisions were brought in as part of the Pensions Act 2008 and require all employers to contribute to either a government-approved pension for all their staff by 2012, unless they actively choose to opt out. Employers have the choice of contributing to the newly-created National Employment Saving Trusts (NEST) - which were formally referred to as Personal Accounts - or develop or join a private pension scheme which offers at least equivalent benefits. Mark Wooldridge, Investment Director at BDO in Southampton said: “The most important thing is for businesses to start planning now, because there’s a lot to consider. There are ways to mitigate what will otherwise be a large spike in costs following the introduction of Personal Accounts.” Mark explains that it is not only the contributions themselves which will hit the employer’s bottom line. If companies choose to deliver their own scheme as an alternative to NEST, they’ll still have to make sure that they can meet the minimum requirements set down by the Government. They will also have to meet the long-term costs of either administering the scheme or paying for an outsourced specialist to deliver it. Even companies with existing schemes will need to allocate resources to ensure that their current provision meets requirements. Furthermore, staff will be looking to their employers for more information on the changes, and a good internal communications campaign will be required to explain why they are receiving a drop in their take home pay. Mark adds: “A lot of employers are concerned about these changes but with proper planning and a phased approach to the introduction, organisations can not only make sure they meet the requirements by the 2012 deadline, but also take advantage of the opportunities these changes present. An example is introducing a pension’s salary sacrifice scheme to help defer some of the costs of complying to the legislation being introduced. It’s also an ideal time to review staff remuneration packages and redevelop these in line with a staff motivation and retention strategy. Far from having the negative effect many employers fear, the new system will in fact not only help individuals, but also organisations to build stronger foundations for the future.” - Ends – Words: 400