The Department for Work & Pensions (DWP) has published a consultation paper on draft regulations and other proposed changes to the auto-enrolment legislation. The proposals follow feedback from employers and pension schemes on their early experiences of auto-enrolment and are intended to improve and simplify the auto-enrolment process.
The key changes set out in the draft regulations are as follows:
- Pay reference periods: An additional method of determining the "pay reference period" for the purposes of jobholder eligibility and the defined contribution (DC) qualifying scheme minimum contribution requirements will be introduced allowing employers to use standard payroll reference periods. This should assist employers in matching salary/wages paid to the relevant pay reference period and will also ensure that the minimum contribution requirements can be met without the need for annual reconciliations.
- Contribution payment deadlines: Employers will be able to retain initial contributions paid by all new scheme members for up to two months, assisting with the administration of contributions and refunds where individuals opt-out. At present, the extended auto-enrolment deadline only applies to jobholders and to contributions taken as part of an auto-enrolment, re-enrolment or opt-in process.
- Contractual enrolment, opt-outs and auto-enrolment: The current easement to the auto-enrolment regime whereby an employer is not required to re-enrol a worker who has opted-out of a qualifying scheme within the previous twelve months will be extended to cover the situation where a worker has opted-out after being contractually enrolled prior to his auto-enrolment date.
- Extension of the joining window: The joining window (the period within which an employer must auto-enrol a worker who meets the auto-enrolment conditions) will be extended from one month to six weeks to assist employers with workers who have widely fluctuating earnings or zero hours contracts.
- Defined benefit (DB) test scheme standard: The "test scheme standard" used to determine whether a non-contracted-out DB scheme is a qualifying scheme will be amended to allow future increases in state pension age to be taken into account and to clarify the quality requirements applying to lump sum schemes.
- Opt-out notices: It will be clarified that opt-out notices must be in substantially the same form as set out in the legislation.
In addition, the consultation paper seeks views on the introduction of a new power for the Government to regulate to allow employers to exclude certain categories of worker from their auto-enrolment duties in circumstances where further pension saving may be inappropriate or financially detrimental. This might be where an individual has registered for enhanced or fixed protection, is an active member of a DC scheme and has given notice of retirement, or has handed in his notice during a deferral period. It also indicates that the DWP is considering two possible easements to the regime. Firstly it is proposed that employers using contractual enrolment could be exempted from their auto-enrolment duties on the basis of a certification that they are meeting the auto-enrolment policy objectives. Secondly, views are sought on whether there are simpler ways than the existing test scheme standard to determine whether a DB scheme is a qualifying scheme and whether there is a need for a quality requirement at all.
The consultation period runs until 7 May 2013. The amending regulations are expected to be in force by April 2014, though the DWP indicates that it may consider bringing specific changes into force earlier if consultation responses show there is demand and it can be achieved without "unwelcome consequences".