(PRWEB) August 15, 2007
National Pensions Saving Scheme (NPSS), will become compulsory in 2012 and was enacted as part of the Pensions Act 2007 in July 2007. The primary aim is to encourage great numbers of U.K. employees to save towards retirement.
Under the NPSS employers will have to contribute 3% of an employee's salary to their Personal Account, employees will pay in 4% of their salary, while the U.K. government contributes 1% via tax relief. Employees will be automatically enrolled in the scheme, but can opt out.
Just 5% of employers responding to the Employee Benefits/Axa Sunlife Pensions Research 2007 believed that auto-enrolment of staff into Personal Accounts is the answer to the pensions crisis, while 21% were undecided as to the effect.
Debbie Lovewell, deputy editor of Employee Benefits magazine, said: "Forthcoming pensions reform is one of the main topics on everyone's lips, and looks certain to remain so for the foreseeable future. Much speculation over the past year, however, appears to have done little to convince employers that these proposals represent the answer to the country's pensions problems."
The research was based on the responses of 574 U.K. employers, over half of which have more than 500 employees.
In the same research conducted a year ago 62% of employers felt that their company pension schemes would remain unchanged in the light of NPSS. However, now just 50% believed it would have no impact.
This relatively high number of employers that think the move will have no effect on their existing schemes goes against the views of many pensions experts, who believe that large numbers of HR, benefits and pensions managers will reduce their organisation's contribution levels in order to offset the cost of having a greater number of employees enrolled in the scheme.
Just 6% of the 2007 respondents currently expect to reduce their contribution levels to cover the costs of having more staff in the scheme.
KEY RESEARCH FINDINGS:
- 77% of U.K. employers feel responsible for employees' long-term financial wellbeing.
- 46% say that their employer contributions will not provide an adequate level of funding for employees' retirement.
- 72% do not measure the return on investment on pensions.
- 34% say they should educate staff on pensions but don't.
- 42% have considered introducing auto-enrolment to boost take up of their defined contribution pension scheme.
- 63% have closed their defined benefit (DB) pension plan to new members.
- 10% plan to increase staff contributions to their DB scheme.
- 56% have made no changes to their scheme in light of age discrimination legislation.
Case study: ISG raises matching of pensions contributions
Construction services company, ISG has increased the level at which it matches the contributions of senior staff to a group personal pension (GPP) from 2% to 5% in order to encourage their long-term commitment to the business.
Around 100 senior staff in its 570-strong workforce will benefit from the change. Richard Martin, human resources director at ISG, said: "We want them to see the value in a long-term career [with us]."
Matching contribution levels for all other employees will remain at 2% for the time being.
However, there are plans to increase contributions for all staff, although Martin admitted that these increases will be forced by the National Pensions Savings Scheme which is due to come into effect in 2012, and is expected to require all employers to offer a pension scheme with employer contribution levels of 3%.
The changes at ISG follows the launch of pensions salary sacrifice in July 2006, helped by Punter Southall.
NOTES FOR EDITORS:
Employee Benefits magazine is a U.K.-based publication which launched in 1997. It is read by nearly 10,000 compensation & benefits managers and HR people specialising in reward in British organisations.
Employee Benefits runs a number of information services - including the Employee Benefits Exhibition & Conference, the Employee Benefits Summit, the Employee Benefits Awards and http://www.employeebenefits.co.uk, which has over 20,000 registered users.
It has been conducting in-depth research on key benefits areas since 1997 and has built up a highly regarded database of surveys which are available free on http://www.employeebenefits.co.uk/research. These include:
- Employee Benefits/HSA Healthcare Research 2007
- Employee Benefits/JPMorgan Invest Benefits Research 2007
- Salaries and perks for benefits experts 2007
- Employee Benefits Fleet Research
- Employee Benefits/Towers Perrin Flexible Benefits Research 2007
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