Fri, 1 May 2009

NAPF puts faith in reforms

Pension changes to be introduced in 2012 could end the decline of private sector employees saving in workplace pensions, according to the National Association of Pension Funds (NAPF).

The changes will include the introduction of private pension accounts, which employees can transfer when they change jobs and require employers to contribute 4%.

An NAPF spokesman said: ‘The 2012 reforms will mean a step change in pension provision in the UK in the private sector, including extra support for the existing good-quality workplace pension provision.’

The newly released Annual Survey of Hours and Earnings (ASHE) revealed that only 35% of private sector employees were active members of workplace pension schemes in 2009, compared with 45% a decade earlier.

The ASHE survey also found that defined benefit schemes are in sharp decline, an issue the NAPF urged the Government to address.

The NAPF spokesman added: ‘We want the next Budget to include a provision for more long-dated and index-linked gilts to reduce the strain of pension scheme volatility on balance sheets. This would help companies maintain current defined benefit provision.’

Hitting the mark

Some 37 pension schemes covering more than 100,000 people hit the Pension Quality Mark, a qualitycontrol award launched by the National Association of Pension Funds. Electrical specialist Comet is the latest scheme to have received the award, which is designed to demonstrate the value of pensions to staff.

Attractions grow for pension salary sacrifice schemes

Stephen Hempenstall, pensions adviser at Mercer Employee Benefits, made a strong case at the Payroll World Annuall UPdate Conference for the growing interest in pensions salary sacrifice. He said that of Mercer’s 400 clients about 25% are on pensions salary sacrifice schemes.

The scheme is becoming more popular because of growing awareness of its generous savings on National Insurance Contributions which enhances employees’ pension contributions.

The message from Mr Hempenstall is the importance of ensuring employees understand what they gain. Delegates understand that what it involves cannot be scribbled on the back of an envelope.

He commented: ‘We had a firm on to us the other day, it wanted a scheme implemented in three months from scratch, but that is just not possible. There needs to be extensive familiarisation of the workforce to get across the positive message of pensions salary sacrifice. It is complicated to set up - and complicated to get across,’ he added.

Salary sacrifice is a contractual change, in which employees accept a lower taxable salary in return for a benefit that can be provided free of National Insurance. As the company saves on the employer’s NI, its reduced costs can be considerable.