From October this year, new rules around workplace pensions come into force.
This means that all employers – however small – will have to provide pensions for their workers. Small employers will start to be affected in 2015.
Brian Button from Active Independence wrote to Steve Webb MP (the Government Minister for Pensions) to clarify how the new rules would affect Disabled people who employ carers and PAs through personal budgets.
Basically, carer & PA pension costs will become part of the cost of employing them – and local authorities will have to bear this in mind.
This is the full response Brian had:
24th January 2012
Dear Mr Button
Thankyou for your letter of 9 January 2012 to the Minister of State for Pensions regarding automatic enrolment, in particular the compulsory duty on employers and the implication for those who employ carers through Direct Payment/Personal Budget funding from their local authorities.
Government Ministers receive a large volume of correspondence every day and, much as they would like to they are unable to respond personally on every occasion. Some correspondence has to be passed to officials for reply. Steve Webb has asked me to reply to you.
The Department for Work and Pensions estimated that around 7 million people are not saving enough to deliver the pension income they are likely to want or expect in retirement. An ageing population combined with millions of people under-saving is one of the biggest long term challenges the UK faces. Without action this could place unsustainable pressure on the state system or lead to poorer pensioners.
To meet this challenge, the Government is committed to introducing automatic enrolment into a workplace pension scheme to increase the number of workers saving and boost saving levels. From October 2012, starting with the largest, employers will be required to automatically enrol all workers aged 22 and over and under pension age who earn more than a set threshold. The Government is currently consulting on a proposal to set the threshold at £8,105 for 2012/12 to align with the tax threshold.
The smallest employers get a breathing space and will not have to automatically enrol their workers until 2015. But, as you have correctly inferred, there are no plans to exempt employers with just one or two workers, because it is important that these employees should not be denied the opportunity to save for their retirement. Direct Payment/Personal Budget is a facility provided to people in lieu of community care services administered by local councils. The level of funding will vary between local authorities but ultimately it is up to each council to decide on the amounts they can ay towards the service and whether a contribution is due from the individual. Any changes in circumstances should be notified to the council in the first instance. People in your position whose care needs are funded in this way may be employers. When making the award the Councils will have regard to the cost of employing the carer, including tax and National Insurance contributions and any other costs that may arise. Pension contributions under automatic enrolment will be an employment cost in the same way.
I am copying this letter to the Department for Communities and Local Government and the Department for Health who will be aware of the implications of automatic enrolment on small employers from 2015 when setting funding levels.
Head of the Correspondence Team.