With staging dates scheduled for 1 March and 1 April 2013, springtime will see many organisations busy with the implementation of workplace pension reform (WPR). The Pensions Regulator has estimated that between 300 and 500 employers have staging dates that fall on either 1 March 2013 or 1 April 2013. Together, these organisations employ between 4.5 and 5 million people in the UK.
Ensuring compliance with the new employer duties will mean a challenging couple of months for those employers affected. However, their task will be made even more difficult by a shift in the goal posts that will apply from 6 April 2013.
The Department for Work and Pensions' (DWP) consultation on automatic enrolment earnings thresholds for 2013/14 closed on 17 October 2012, but the figures government will use for WPR compliance for the tax year beginning 6 April 2013 are yet to be announced. The consultation suggested that the automatic enrolment threshold could shift from £8,105 to £9,205 (and so remain in line with the level at which employees start to pay income tax). The Chancellor's Autumn Statement has, however, made this less certain, with an additional £235 rise in the income tax threshold to £9,440 announced.
The consultation also put forward plans to shift the earnings band, with the 'floor' moving from £5,564 to £5,720 (in line with changes in the lower earnings limit for national insurance contributions). Under the consultation, the earnings band 'ceiling' could be frozen at £42,475, reduced to £41,450 or increased to £42,971. Again, it is not clear if the Chancellor's Autumn Statement will force some last minute alterations at the DWP.
As we approach the end of 2012, employers are facing uncertainty at a crucial time when they are designing payroll systems and drafting communications for their workforce. The challenge will be greatest for employers with March and April staging dates.
Employers with between 10,000 and 19,999 workers have a staging date of 1 March 2013. They will have to communicate to their workforce based on the 2012/13 figures that will still be in force, but also convey the message that these threshold figures will change from 6 April 2013.
The situation is potentially even more difficult for those employers with between 6,000 and 9,999 workers. They will be subject to employer duties on 1 April 2017 under the 2012/13 figures and will then shift to the 2013/14 figures less than a week later.
One practical solution to this will be to use postponement. Employers can postpone their employer duties by up to three months, enabling them to postpone until at least the 2013/14 figures are in force. If employers use this approach, they need to be aware that jobholders have the right to opt in during the postponement period. An opt in request is effective from the start of the jobholder's next pay reference period.
To guide businesses through dealing with the reform, Wragge & Co's Pensions team has gathered analysis, videos and useful links in a dedicated workplace pension reform micro-site. For more detail on implementing the reforms, why not take a look at our comprehensive guide and glossary.