As you may be aware legislation has been put in place which will change workplace pensions provided by employers. These changes are being brought in to help people save for when they retire. They can have a major financial impact on your Credit Union.
What will it mean for employers?
Employers will have to enroll their employees into a pension scheme, and make contributions towards the pension, where the employee meets certain criteria. These criteria include the age of the employee and how much they earn.
Employers will have to contribute at least 3% of these workers’ earnings. Total contributions (by employer and employee) will have to be at least 8% of the employee’s earnings.
Do employees have to join the scheme?
Employees can choose to opt out of the scheme, but have to be enrolled into the scheme before they can opt out. Figures for those organisations who have already implemented auto-enrolment show only 10% have opted out.
When do I have to make these changes?
Each employer will be given a date by which these changes have to be put in place. This is called a staging date. This date is based on the number of workers they employ. The Pensions Regulator will contact employers 6 to 12 months before their staging date. You can also use the pension regulator’s website www.thepensionsregulator.gov.uk to find out your likely staging date.
What should I do just now?
If you already provide a pension scheme for your workers, you will need to check it meets the new requirements. If you don’t have an existing pension scheme then you should take advice on how to find one.
If you operate a final salary scheme then you should consider the impact if all your employees were to join the scheme and whether the Credit Union could financially cope. You should consider the various pension scheme options if you are in such a situation.
Where to find more information
Alexander Sloan Financial Planning are experienced at advising organisations on pension schemes. Please also see Alexander Sloan Financial Planning’s recent blog for more information on auto-enrolment.