When it comes to pensions, major changes have been taking place across the border.
While in Ireland pensions are still an optional employee benefit, provided at the company’s discretion, that’s no longer the case for our nearest neighbours.
Now, many observers are asking the very reasonable question: how long before Ireland follows suit?
And, just as importantly: how can I make sure I’m ready when it does?
But first things first. What’s actually going on in the UK?
In 2012, the UK embarked on the path of auto-enrolment. Last October, it became a legal obligation for all companies with more than 60 employees to auto-enrol employees between 22 years old and the State Pension Age into a pension scheme, if they earn over £9,440 (€11,500) per year.
And, while it doesn’t have to happen automatically, they must at least offer a workplace pension scheme to all employees aged 16-74, or those earning under the threshold, if they ask for one.
By 2018, companies with 50 or fewer employees will need to get on board, too.
Once the dust has settled, employers will pay 3% of the individual’s gross earnings into the scheme, up to an income threshold of £41,450 (€50,500). Employees will pay 4%. This is being phased in gradually, though, up until the 2018 deadline.
While employers are obliged to auto-enrol their staff, individual employees don’t have to stay in the scheme. They can choose to opt-out by filling in a form. However, their bosses must keep re-enrolling them automatically every three years.
What’s more, companies that fail to comply with the regulations could face fines of between £50 and £10,000 a day, depending on how many employees they have.
And how’s it working out so far?
Pretty well, actually.
Auto-enrolments chief Charles Counsell has proclaimed the project so far to be a “success” and most UK companies seem to agree with him.
Research conducted last summer found that most employers were confident that the new rules were “manageable” – although, unsurprisingly, smaller businesses had more qualms.
80% of SMEs said that automatic enrolment was a “good idea” for their employees, compared to 86% of small companies and three-quarters of micro ones.
So what does this mean for you?
At the moment, the debate over auto-enrolment continues in Ireland
Big players like the benefits consultant Mercer are pushing the government hard to follow the UK’s lead. The OECD has been urging the country to adopt the approach for years.
Meanwhile, opponents like the Irish Association of Pension Funds say the whole pensions sector is in a mess and “there is a huge amount of work to be done before any type of auto-enrolment solution is introduced in Ireland.”
But whether it happens sooner or later, the likelihood is that it will happen.
And the best thing a responsible, forward-looking company can do right now is to be ahead of the curve.
If you don’t currently offer your employees a pension, now is the time to start addressing the shortfall. To get you started, I talked about the different types of pension you can provide, and their comparative pros and cons, here.
Taking control of the situation by implementing your own initiative means that you can do things your way – while keeping your current employees happy and offering a great perk to potential new ones.
After all, as consultant Tracie Denson of Barclays Corporate and Employer Solutions puts it: “Nobody understands the business better than those who work within it.
“That said, we have also seen how easy it is for businesses to underestimate complexity of auto-enrolment and the time it requires.”
Want to find out more about how auto-enrolment could affect your business, or to talk to an expert about the best pension options for your team? Give us a call today.