David Wright, of DLA Piper, says firms are unprepared for pension reforms

FROM next year, the Pensions Act will introduce a duty on all employers to automatically enrol jobholders who meet specified criteria into a pension scheme. These duties apply equally to both large employers as well as small and micro employers, provided they employ at least one relevant jobholder, which includes part- time workers.

The only real exemption is in respect of jobholders who are already active members of a qualifying scheme or who have previously opted out of one.

While employees may voluntarily opt out, there are safeguards built into the legislation to prevent an employer encouraging this or seeking to avoid the duties through its recruitment policy. Even employers who opt out must be re- enrolled at regular intervals.

As a result, pension contributions and administration costs are likely to increase for most employers.

It is clear that employers and employees alike are struggling to engage with this issue. These new duties will have financial and operational consequences for employers so businesses really do need to start making decisions about what scheme to use, what contributions to pay and how to communicate all this to employees. Compliance with the new duties will be a key focus area for the Pensions Regulator, and there are some hefty penalties for non-compliance, so decisions cannot be put off for much longer.