The Department for Work and Pensions (DWP) has today (1 February 2012) published documents confirming most of the final details of the rules in respect of automatic enrolment into workplace pensions. The documents set out changes that are made to regulations and provide revised guidance on the circumstances in which an employer can certify that their defined contribution (DC) scheme (or the DC element of their hybrid scheme) satisfies the quality requirements.
The key announcements are:
Two of the three certification tests available to employers with DC schemes require pensionable earnings to at least equal “basic pay”. This will no longer be defined to include all fixed elements of remuneration (eg car allowances), making it easier for employers with non-pensionable benefits to persist with their current definitions of pensionable pay.
The Government had always intended that bonuses, overtime and commission would not be considered part of “basic pay”. It has now confirmed that shift premiums and allowances for cars, meals, clothes, relocation, and health and safety responsibilities are also excluded. Area allowances (eg, London weightings) do not feature on this list, so it seems likely that they will need to be included.
Employers wishing to certify will now have to do so every 18 months rather than annually, allowing them to align with their re-enrolment dates.
Employers will be permitted to postpone automatic enrolment by up to three months and to select a re-enrolment date that is up to three months either side of the anniversary of their staging date.
Where employers are deferring automatic enrolment by up to three months, they will now have one month rather than a week to issue the deferral notice to staff.
The Government has confirmed that it will repeal rules which would have delayed the automatic enrolment of low-earning employees following a temporary “earnings spike”. However, employers will generally be able to apply deferral periods in these circumstances.
All of the information for existing employees whose enrolment is deferred until the end of the transitional period for defined benefit schemes must be provided within one month (previously a mixture of one week and two months).
The DWP states that the Pensions Regulator is considering whether to amend its guidance on the interaction of automatic enrolment and salary sacrifice. Discussing the automatic enrolment of seafarers, it also says the Regulator will issue guidance on what is meant by “ordinarily working in the UK”.
Regulations implementing the policy decisions described above have also been published today.
We still await the outcome of the consultation on the review and revision of the automatic enrolment thresholds (which closed on 26 January 2012) and publication of guidance on the certification of defined benefit and hybrid pension schemes.
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