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The government’s proposed 2012 pension reforms will oblige  employers to offer a private sector pension scheme, known as a Personal Account, to all eligible employees who are not covered by in-house alternatives.

David Lane, head of M&A at actuarial consultancy Lane Clark & Peacock, says, ‘Employees are automatically enrolled on the pension schemes. They can opt out, but under current proposals, the government will make it as difficult as possible to do so. Even if you opt out, you’ll have to go through the same process in three years’ time.’

Contributions to the Personal Accounts will be staged over a period of time until eventually employees will provide four per cent of their income, while employers will provide three per cent and the government will contribute one per cent.

The reforms are likely to have an immediate effect on businesses. Esther Smith, employment partner at law firm Thomas Eggar, says, ‘Companies without pension schemes have ignored pensions. As long as they offered a stakeholder scheme that no one signed up to, they were covered. They can’t do that any more.’

Not everyone agrees with the course of action taken by the government. Lane adds, ‘I think the government is barking up the wrong tree. There’s a real need to raise the state pension age by a considerable amount. People are fitter now and they can work longer. In fact, a lot of people want to work longer and are being forced out of the labour market.’

For all the challenges that pension reform faces, there is a feeling that something needs to be done. Caroline Armitage, corporate partner at Thomas Eggar, says, ‘People are living longer and there is a rising pension deficit. It may be too late, but at least it’s a contribution. The 2012 reforms are as good an alternative as any.’

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