Employer Action Code: Act
Final details of a new U.K. requirement to automatically enroll employees in a pension plan have been published. Employers with the largest U.K. workforces (120,000 or more) must start auto-enrollment on October 1. Requirements will gradually be phased in for smaller employers (e.g., March 1, 2013, for employers with more than 10,000 U.K. employees and year-end 2013 for all employers with more than 500 U.K. employees.)
Employer Implications
Employers should make final preparations to ensure the necessary communication, sign-up administration and payroll adjustments are in place to meet the new requirements. Employers wishing to use their existing pension plans to satisfy the auto-enrollment requirements now have all the details needed to check whether they meet the relevant quality test or to amend their plans to ensure they comply. Employers without a suitable existing pension plan will need to create a new plan or select an external provider.
Employers also need to make employees aware that they have the option to immediately leave the pension plan they are enrolled in — although there is no option to avoid the initial enrollment. Employers will need robust administration to capture these movements, which could involve substantial changes over a short period, to ensure only appropriate payments are made.
Particular care will also be needed to ensure correct treatment is given to “nonstandard” individuals, such as those on a temporary assignment outside the U.K. who intend to return.
For a detailed list of start dates by employer size, visit the staging date calculator. For general details, you may also read this overview or the Towers Watson research resource, which offers links to final guidance, timelines and the U.K. Pensions Regulator’s intended enforcement plan.