Further consultation has been issued on the detail of automatic enrolment, including draft regulations and guidance on the certification process for money purchase schemes. The draft regulations are designed to tie up with the changes to the regime currently included in the Pensions Bill 2011. We have previously reported on the proposals in the Pensions Bill and will be providing further detailed analysis once the legislation is finalised. Below is just a very brief summary of two issues arising from the current consultation.
A key change proposed is the removal of the easement for “accidental jobholders”. This is an individual whose average annual earnings would not be sufficient to bring him up to the qualifying earnings level for automatic enrolment but who had an isolated “spike” of earnings which would (if it were not for the “accidental jobholder” easement) require him to be enrolled. The consultation suggests that it would be impractical for employers to monitor earnings over rolling 12-month periods and it is hoped that the proposed new “threshold earnings” band will mean that few employees in practice will be pushed into automatic enrolment purely because of a temporary “spike”. The practical effect of this change (if adopted) may well be that more casual or seasonal workers will have to be enrolled into qualifying pension schemes.
A second limb of the consultation concerns the self-certification of DC schemes and includes draft guidance and a specimen certificate. It also contains details of the transitional contributions required to meet the three-tier test (see table) which allows schemes to retain their own pensionable earnings definitions as long as they meet one of the three tests. The main certification requirements are:
- The certificate must be given by the employer or someone authorised by it and must have regard to the guidance;
- The certificate may be given for a period of up to one year;
- The certificate can be given up to one month after the date on which it takes effect;
- The person giving the certificate must certify that he/it is of the opinion that the scheme (or relevant part of it) is able to satisfy the relevant quality requirement throughout the certification period i.e. the certificate looks forward rather than back;
- When renewing a certificate the employer must assess whether the certification requirements were in fact met during the period of the old certificate and, if not, what action needs to be taken to remedy that. This assessment must be recorded in writing and kept for six years.
Table of contributions for money purchase schemes - click here to view table
The consultation document, draft regulations and draft guidance can be found here