Secondary pensions will bring long-term benefits
Large and medium-sized employers without a pension scheme have just eight months to get sorted and comply with legislation coming into effect from 1 July next year.
Secondary pension legislation will require large employers with more than 26 staff to enrol eligible employees for an approved secondary pension scheme or the States-approved scheme Your Island Pension.
Voluntary enrolment can start from 1 January.
Smaller employers will have to follow suit over the next 15 months, in what Employment & Social Security president Peter Roffey has called one of the biggest social changes the island had seen in the last 20 years.
‘It will reduce pensioner poverty, as just relying on just the States pension will never provide people with a particularly luxurious lifestyle once they are retired,’ he said.
‘It will also enable businesses of a smaller size to offer a pension where they may not have been able to before.’
Deputy Roffey was confident that previous delays to the scheme, including Brexit, Covid and political interference, were a thing of the past.
‘I’m pretty sure it’s all going to go ahead, we’ve reached the end of the politicking now and done it to death.’
Employers will be able to choose the level of contributions in their pension scheme, but they must contribute a set minimum amount, which is 1% for 2024.
The minimum contributions will increase over time to 10% of the employee’s salary in 2032.
To be eligible for a secondary pension, members of staff must be aged between 16 and state pension age, not in full-time education, and likely to earn more than the lower earnings limit each year.
If employers do not make it compulsory for their staff to join a secondary pension scheme as part of their contract of employment, employees will be able to opt out of the secondary pension arrangement if they wish.
‘I would advise employees against opting out if they have the choice.
‘It’s a stripped-down scheme that will be attractive to people and allow them a decent quality of life in retirement,’ Deputy Roffey said.
‘There’s never a good time to introduce a policy like this in the short term, because of the cost-of-living crisis, but the benefits will be felt in 20 years.’
