Shortly before the dissolution of Parliament, the Government laid amending regulations introducing some "technical changes" to the regime for automatic enrolment of workers into suitable workplace pension schemes. This included a long awaited relaxation for workers who have opted out of any future pension saving for tax purposes.
These changes to the automatic enrolment regulations - which came into force on 1 April - are:
- Employers are now not required to automatically enrol workers who:
- Are under notice to terminate employment.
- Have opted out of the pension scheme in the previous 12 months. This avoids the situation where a member has opted out and then – by earnings increasing over the income tax threshold or turning age 22 – becomes an eligible jobholder who is then subject to automatic enrolment. The worker would be subject to re-enrolment in three years time.
- Have opted for a tax protected status for existing pension savings. One of the consequences of these protections is that no future pension saving is allowed. HMRC have as a concession agreed that workers who leave the scheme during the opt-out window would not lose their protected status. However, that ran the risk of a worker losing their protection through inadvertence in not opting out straight away.
- Changes to the information requirements to facilitate one individualised communication, which suits all circumstances. The Pensions Regulator has updated its guidance and template letters to workers to reflect this simplification.
- A new quality requirement test for defined benefit schemes was introduced by the Pensions Act. This was needed as one of the current tests – that the scheme was contracted-out of the state second pension – could no longer operate from 6 April 2016 as contracting-out was being abolished and the existing alternative test was considered unnecessarily complex. The new test requires certification that the cost of providing accruals is at least equal to a prescribed percentage of earnings. The regulations set out the details and percentages and the intention is that this certification will become part of the regular triennial valuation