THERE will be more pensioners in the future... and those pensioners will live for longer.

This is going to put a massive strain on the state pension system.

To alleviate this burden the Government is making changes to the basic state pension, the state second pension and introducing new employer duties.

For the first time in our history employers will be required to automatically enrol eligible employees into a workplace pension scheme and, if the employee stays in the scheme, the employer will be required to make contributions.

The roots of these changes go back to 2004 when a report was produced by the Pensions Commission which found that:

􀁥 People are now living longer and, therefore, will need to receive money for longer periods during their retirement;
􀁥 The basic state pension is one of the lowest in Europe and on its own is not enough to provide a comfortable retirement;
􀁥 The general public view pensions suspiciously and are reluctant to invest;
􀁥 Younger people delay saving and then have less time to build up a pension.

It is imperative that the principals of firms are provided with the proper education and support leading up to the changes that will come into effect from October 2012.

These changes will have a considerable impact on all businesses.

They must provide a pension scheme and, as an employer, will need to make a contribution.

Those who already offer pension arrangements for their workers will still have some new obligations to meet. Others, who have done nothing for their staff, will have to set up an arrangement.

The extra requirements will mean that there will be additional administration and increased costs to the business.

While we have seen initiatives on pensions before, namely in the form of stakeholder in 2002, we can be in no doubt that these reforms will be taken extremely seriously by the Government as they need to ensure that the next generation are adequately provided for in their retirement.

It will classed as a criminal offence for an employer to wilfully fail to comply with the provisions of the Pensions Act.

Here at Three Counties we are holding a seminar and have produced a helpful stepby- step guide for employers, taking them through not only the changes, but also the actions required to ensure compliance.

􀁧 John Baxter is a director of North-East independent financial advisors Three Counties.

Three Counties is authorised and regulated by the Financial Services Authority.