The draft Occupational and Personal Pension Schemes (Automatic Enrolment) (Amendment) Regulations 2014 have been laid before Parliament and will relax the criteria governing whether a career-average revalued earnings (CARE) scheme will count as an auto-enrolment qualifying scheme.
The following changes will be made:
- a CARE scheme will no longer be disqualified from being an auto-enrolment scheme if accrued benefits are revalued at less than a minimum rate, provided that both the scheme’s funding and statement of funding principles assume that revaluation will be at or above a minimum rate of the lesser of the annual increase in the CPI, RPI or 2.5 per cent. The DWP states that this should allow schemes that revalue by reference to the increase in earnings to qualify, in addition to those that revalue by price inflation;
- the minimum rate is set at a different rate for certain public service CARE schemes, allowing for an annual increase or decrease in line with a “relevant percentage” specified in a Treasury Order; and
- hybrid schemes will be permitted to phase in employer and total contributions in relation to their money purchase benefits under the transitional provisions for money purchase schemes. Currently, an employer which provides a hybrid pension scheme and certifies the money purchase benefits in the scheme against one of the alternative quality requirements is unable to phase in contributions.
It is intended that the regulations will come into force on 1 April 2014.