Start preparing for retirement early

Most companies are unaware that new pension legislation could have consequences for IT departments, writes Karl Cushing.

Most companies are unaware that new pension legislation could have consequences for IT departments, writes Karl Cushing.

Starting in October, the legislation requires every company with more than five employees to offer stakeholder pensions to staff. The new pensions are launched in April, but most technology companies are still in the dark about requirements. In a study by Prudential, only 10% of SME technology companies polled had heard of the measures. Non-compliant employers risk fines of £50,000.

John Campbell, technology director at pensions portal Simple2, cites a study by Scottish Amicable. It looked at 1,000 businesses with up to 50 staff and found that only 20% are likely to have reviewed pension plans by October.

"Providers won't have products available until April," Campbell says. "We have a window from April to October to get companies in the UK on track.

"Doing that is going to place a heavy burden on them. In our view, when a company gets this burden, it's going to look to IT."

Companies will have to keep a new system of records and IT directors must ask if existing systems can cope.

Employers can supply these schemes by putting a pensions portal on their intranet. This would enable staff to access a pensions wizard, change monthly contributions, view funds valuation and performance, switch funds and update personal details.

"We've built a system which we believe is capable of providing the data that companies will need to deal with these schemes," Campbell adds.

IT directors need to consider the best way to integrate with pension providers.

"If you can do all this electronically at minimal cost, then why not?" Campbell asks. "To use a portal, all you need is a browser and spreadsheet package."

Ensuring all systems are secure and compliant with the Data Protection Act is another issue.

"A big headache will be administration of premiums to providers - that's a lot of work every month. HR and IT will have to work together," says Campbell.

A good stakeholder pension scheme may help staff retention. Staff interest in similar schemes launched abroad went "through the roof", he says.

"For most people, pensions are the second biggest investment after a mortgage," he says.

"A company offering good pensions is going to distance itself from competitors."

What employers must do

  • Consult with staff or representatives before nominating a pension

  • Nominate at least one stakeholder scheme by October 2001

  • Put in place a payroll contribution service

  • Provide information and monitor schemes

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