The DWP has issued consultation on the (as yet unnamed) pension scheme which will be the default scheme for automatic enrolment from 2012. Any employer which does not provide its own qualifying scheme will be required to enrol its employees into this scheme.

The consultation is on a draft order setting out some legislative parameters and draft Rules. It is estimated that the scheme will have between 2 and 8 million members and hundreds of thousands of non associated participating employers. It will be a trust based occupational DC scheme, regulated by the Regulator and providing benefits on retirement, death and ill-health. It will have some features not usually found in occupational DC schemes:

  • it will be established in legislation and sponsored by the Secretary of State
  • it will have a public service obligation to accept any employer and any worker enrolled by an employer
  • there will be no differentiation between contributing and non-contributing members - all members may remain active and continue to contribute until they access their benefits (irrespective of whether they remain in employment)
  • self-employed people may join direct
  • there will be a total annual contribution limit of £3,600 - subject to annual increase
  • there will be a general ban on transfers out (with limited exceptions for those at NRD or suffering incapacity)
  • there will be a members' panel and employers' panel for consultation with the trustees
  • there will be no postponement of automatic enrolment
  • it will be self-financing from member charges deducted from individual accounts.

The scheme will generally operate within existing law and regulation - but there will need to be some modifications.

There will be further consultation this year on investment and the second consultation on employer obligations in relation to automatic enrolment. Please see our recent briefing for further details.