Average Salary Pension Schemes

Employers must satisfy their automatic enrolment duties by auto enrolling their workers into a qualifying pension scheme.  However, until now, average salary pension schemes could only be classified as this type of qualifying pension scheme if, amongst other things, they revalued active members’ benefits by a minimum amount. Regulations which came into force on 1 April 2014 give more flexibility in the way in which this revaluation can be provided for an average salary pension scheme to be a qualifying pension scheme for auto enrolment purposes. 

Hybrid Pension Schemes

Employers using a hybrid pension scheme (that is, a scheme which provides benefits on both a final salary and a money purchase basis) for the purposes of auto enrolment by certifying the money purchase benefits in the scheme against the alternative requirements have not been able to phase in the minimum employer and total contributions required for auto-enrolment purposes in relation to those money purchase benefits in the way that ‘pure’ money purchase pension schemes are able to. New regulations have now removed this inconsistency and put the money purchase section of hybrid pension schemes on the same footing as ‘pure’ money purchase pension schemes for this purpose. This will be of some comfort to employers who wish to use the money purchase sections of their hybrid pension schemes for auto enrolment purposes in that they too will be able to phase in their minimum contributions, which should ease some of the financial burden of the process in the initial stages for such schemes in these circumstances.