Following on from the Government's December 2006 white paper, the Pensions Act 2007 created the Personal Accounts Delivery Authority (PADA) and introduced certain reforms of the state scheme. The Pensions Bill is the next stage in the implementation of the white paper proposals and was introduced to Parliament on 5 December. It sets out further details on the proposed operation of PADA and auto-enrolment into the personal accounts pension scheme. However, the changes are only expected to take effect in 2012:
- Auto-enrolment into the personal accounts pension scheme will apply to agency workers.
- The auto-enrolment provisions will not apply where the employer operates a "qualifying pension scheme". Broadly, a defined contribution occupational pension scheme or a personal pension scheme will be a "qualifying pension scheme" if the employer contributes 3% or more of the employee's qualifying earnings, and the total employer and employee contributions are at least 8% of the employee's qualifying earnings. Similarly, a defined benefit scheme must either be contracted out of the state second pension or must meet a "test scheme standard".
- Qualifying earnings are an employee's gross earnings between £5,035 and £33,540.
- PADA's functions, and the principles which it must apply when performing its functions, are set out. In essence, its function is to give advice and assistance to the Government in connection with the operation of the personal accounts pension scheme. Amongst its principles of operation is the need to encourage participation in the scheme, to minimise burdens imposed on employers, to minimise the cost of membership, and also to minimise any adverse effects on qualifying pension schemes. PADA must also take into account, "so far as practicable", the preferences of members when making provision about investment choices.
- The enforcement regime is outlined: there will be a system of compliance and penalty notices with attaching civil penalties, and these will be backed up with criminal sanctions.
Much of the detail of the reforms will be set out in subordinate legislation, as will the governing documentation for the personal accounts pension scheme.