Stop! All change for pensions

When you look around your practice, you can quickly pick out the things that really make the practice run. Firstly, you need the tools to allow you to do the job – and secondly, the people. From the dentists to the nurses to the practice manager, your people make the place run. Those two assets need to be protected to make sure the practice prospers.

So, let’s consider your staff. Nothing has changed from the point of view of an employer’s liability – most surgery policies will tend to include employer’s liability, personal accident and assault cover – but the new responsibility for employers takes on a different form in the shape of pensions. By now, auto-enrolment is a common term, thanks to the national celebrity-endorsed TV and radio ads, but what’s it all about?

When did it all begin?
The auto-enrolment revolution begins on 1 October for the largest firms and will mark one of the biggest changes to the pension system in the UK. It is designed to bring about a substantial increase in the number of people saving for retirement rather than relying on the State Pension.

The Department for Work and Pensions (DWP) estimates that 600,000 workers will be enrolled by the end of 2012. Overall, 11 million people will be eligible. Pensions minister, Steve Webb, estimates that between six million and nine million people will stick with the pension saving, rather than opt out.

Who does auto-enrolment apply to?
Auto-enrolment applies to all employers including dental practices that employ one or more UK workers (including employees and contractors). Most workers (who are not already members of a qualifying pension scheme) will be enrolled if they are aged between 22 and the state pension age and earning above £8,105 a year – known as eligible workers. In addition, workers aged between 16-75, earning below £5,565 have the right to opt-in to a pension scheme, but the employer does not have to make a pension contribution.

When does it start?
The requirement to enrol most employees into a qualifying pension scheme begins in 2012 with the largest firms. For smaller employers, it takes effect on staging dates over the next five years and, as many dental practices are small firms employing fewer than 50 people, the actual need to have something up and running won’t be until the end of 2015.

What kind of pension scheme must be provided?
Employers must operate one or more qualifying auto-enrolment pension schemes. These may be an existing or new occupational or personal pension plan, and/or one of a number of super trusts such as NEST (National Employment Savings Trust), a new defined contribution multi-employer pension scheme introuced by the government as part of its workplace pension reforms. Employers are not restricted to using a single scheme; they can use different ones for different parts of their workforce. To qualify, existing pension schemes may have to change their arrangements.

What level of pension contributions must be paid into the scheme?
Both employers and employees will pay contributions into the pension scheme (unless the employee opts out). Statutory minimum contributions are being phased in, starting at 2% of qualifying earnings (including at least 1% from employers). From October 2018, contributions of 8% of qualifying earnings (including at least 3% from employers) will be payable. Initially, qualifying earnings are those between £5,564 and £42,475.

Can employees opt-out?
Yes and the DWP suggests one in four may opt-out. However, employers cannot induce employees to opt-out and, broadly speaking, every three years, employers must re-enrol all eligible jobholders who have opted out.  
Time to panic? Probably not. If you have fewer than 50 employees you have plenty of time to think about it.

But as a final thought, auto-enrolment ups the expectation of employees, so it may become an additional risk to employee retention. Salary will always be the main driver for good people to stay but, as more and more people become familiar with pensions and benefits, will employees become more demanding on how much you’re putting into their pension pot?

Aon is working with BoD to provide a number of insurance solutions for the dental market. For more information, ring 0845 026 7016. Maximum call charge from a BT landline is 3p per minute. Calls from other networks may vary. Calls may be recorded. Aon UK Limited is authorised and regulated by the Financial Services Authority in respect of insurance mediation activities only.


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