The world’s going to end in 2012. Sorry to ruin your day.
So says the Hollywood blockbuster 2012 released this Friday (I should be on commission) which foretells doomsday coinciding with the end of the ancient Mayan calendar.
Another theory – could it be a cataclysmic by-product of the introduction of pension scheme auto-enrolment in 2012?
Pensions auto-enrolment will see millions of people being given access to workplace pensions for the first time. Employers will be able to auto-enrol employees into “personal accounts”, a massive nationwide pension scheme currently in the design stages. The latest idea from the Personal Accounts Delivery Authority is that, rather than building a new IT system to cope with the millions of individuals expected to save through personal accounts, it would “be more cost effective to stitch together offerings” from existing fund administration/investment management service providers. Will the system be ready in time and will the stitching hold? Let’s be honest, the authorities’ track record on handling data isn’t great.
As an alternative to (or in combination with) personal accounts, employers will also be able to auto-enrol employees into new or existing pension schemes that meet quality standards. At a recent consultation workshop, a DWP official warned that “there won’t be a single pension scheme in the country that won’t have to be amended” if it’s to be used for this purpose. And remember, the quality requirements apply for employees who are already members of a workplace pension scheme as well – even if employers want to do something different for new employees, they need to see whether their existing arrangements meet the quality standards for existing employees who are already members. So, you can run but you can’t hide from auto-enrolment.
As the 2012 movie ads say – “How will you survive?” If an employer’s going to use an existing scheme then contribution levels, pensionable pay definitions and, fairly obviously, enrolment provisions will need to be checked, to name a few important issues.
Probably the key message for employers is start budgeting now. For many employers, auto-enrolment will mean increased pension costs. Another slogan from the movie seems appropriate – “We were warned”.
So, whether auto-enrolment will bring about the end of the world or the end of the world will end auto-enrolment, who knows. At least if the world ends we won’t have to deal with auto-enrolment. Every cloud and all that…
Stephen Beattie is an associate at Allen & Overy LLP.
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