I’ve heard it’s going to become law for an employer to provide a pension – is this correct and what will I need to do?

YOU have heard correctly.

The States of Guernsey has passed proposals to implement legislation that will make it a mandatory requirement for all local employers (regardless of industry) to enrol their eligible employees into a qualifying employer sponsored pension scheme – under what is being called the ‘Secondary Pensions’ regime.

This is scheduled to come into effect in 2021; we expect (and hope) the States will engage with all local employers in the coming 12 months.

Secondary pensions should be similar to ‘Auto-Enrolment’ in the UK (as seen on TV), introduced in 2012, making it compulsory for UK employers to enrol their eligible workers into a pension scheme. Employer and employee both pay money into a pension scheme at a minimum level prescribed by the UK government.

The secondary pensions regime aims to ensure that the majority of the working population is saving adequately for retirement. Most people agree that the States’ old age pension is unlikely to cover someone’s living expenses in retirement.

The expectation is that the States will select a scheme provider that will administer a ‘default’ secondary pension scheme, which would be open to all employers and will likely be a low-cost option. Employers would also be able to opt for an alternative scheme offered by other pension providers if the default option does not meet their needs.

Employers not affected are those which already provide employees with a local pension scheme if it is considered to be a ‘qualifying scheme’ (details yet to be announced) and the level of contributions being consistent with the new legislation. Like anything, the devil will be in the detail and this will not be known until the States issues further information.

Local independent financial advice should be sought by employers to ensure their pension scheme provisions, default or otherwise, meet their own requirements and those of the new legislation.