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Barnett Waddingham comments on Government plans for Auto Enrolment

PRESS RELEASE - 28 OCTOBER 2010

Clive Grimley a partner at Barnett Waddingham, commenting on Government plans to introduce automatic enrolment into workplace pensions, following an independent review, said:

“Many individuals will be worse off as a result of these proposals by losing their means–tested benefits. However, this could be mitigated if Vince Cable’s plans for a non means-tested minimum £140 state pension for all is introduced.

“For many small employers the cost for contributing to worker’s pensions for the first time will be a significant burden especially at time when the business climate is so poor. Their concerns will not be reduced when the cost of the NEST Quango is taken into account, particularly as we know only one bidder for the administration role was finally considered. 

“The threshold of £7,475 is a big uplift from the figure £5,035 given for 2006/7 in real terms, some 30% after allowing for price inflation since April 2006.  This reflects a departure from the previous implication that the requirements would catch all members with qualifying earnings (based on the NI primary threshold.

“However the introduction of the three month waiting period is a practical solution to avoid seasonal and temporary workers being included.  

“For other employers, who are already contributing to employee’s pension arrangements, it may be tempting to take this opportunity to level down contributions.  

“As in Australia, some future government might need to decide how to distribute a mountain of orphan funds.” 

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