Registered Providers will be used to funding generous pensions benefits for their employees, who are members of defined benefit pension arrangements like the Local Government Pension Scheme (LGPS) and the defined benefit section of the Social Housing Pensions Scheme (SHPS) which is administered by the Pensions Trust. There have been proposals to change the future provision of pension benefits under both the LGPS and SHPS. This will have caused financial and HR issues for Registered Providers, not least because the pension changes have been resisted by the Trade Unions involved. Some Registered Providers may not be fully aware of these changes and may need advice to understand the consequences for the Registered Provider and its employees flowing from the changes.
To add a further layer of complexity, Registered Providers will need to abide by the new Government requirements relating to the compulsory provision of workplace pensions for qualifying employees. These requirements came into force on 30 June 2012 and will eventually require all employers in the UK to automatically enrol workers into a pension scheme.
The requirements apply on a staged basis in accordance with the number of employees in your PAYE scheme on 1 April 2012. Registered Providers with a higher number of employees will have an earlier staging date than those with fewer employees (although smaller employers can opt for earlier staging dates). As a guide, the position is as follows:
- More than 250 employees: staging dates between 1 October 2012 and 1 February 2014;
- Between 50 and 249 employees: staging dates between 1 April 2014 and 1 April 2015;
- Fewer than 50 employees: staging dates between 1 June 2015 and 1 April 2017.
Registered Providers need to consider their auto-enrolment obligations well in advance of their staging date and take appropriate advice to help them deal with these new requirements. It can take 12-18 months for employers to implement the required procedures necessary to comply with their auto-enrolment regime.
As part of this planning stage for auto-enrolment, the following issues will be crucial:
- Assessing your workforce: you will need to identify eligible jobholders/employees who must be automatically enrolled into a pension scheme. This will involve monitoring the earnings of employees. In addition, there are employer duties in relation to other types of worker (called ‘non-eligible workers’ and ‘entitled workers’);
- Reviewing your pension arrangements: you may have an existing scheme which may count as a 'qualifying' scheme for auto-enrolment purposes. Alternatively, you may wish to either set up a new scheme or participate in one of the industry-wide qualifying schemes for auto-enrolment purposes. With many Registered Providers closing their pension schemes, a new scheme may be a better option. Compliance with auto-enrolment may be a factor leading Registered Providers with open defined benefit schemes to seek to close these schemes; and
- Communication with workforce: you will have to write to all workers to explain what membership of a workplace pension means for them.
Auto-enrolment will represent an additional layer of administration and cost for Registered Providers and should be factored into their overall HR and remuneration strategies. Registered Providers will want to tackle these issues early on with their advisers in order to maximise staff retention and performance and not fall foul of the Trade Unions.
Auto-enrolment is not an option but is compulsory and the Pensions Regulator has powers to issue financial penalties for non-compliance.