“Pragmatic approach” welcomed as “major step forward”

Following the Department for Work and Pensions’ (“DWP”) consultation
exercise in September 2009, key changes have been made to the draft
regulations initially published.  The revised regulations relate to
employers duties set out in the Pensions Act 2008 and were laid before
Parliament on 12 January 2010.  The regulations will introduce a
requirement for all employers to automatically enrol workers and pay
contributions into their workers’ pension schemes.

The amendments have been made in accordance with the DWP’s stated
aim to establish a “minimum level of effective regulation without over
specifying process steps” and are set out below:

• the overall period for the staging process designed to bring
  employers within the scope of the reforms (month by month according to
  their size) has been extended from 3 to 4 years.  Employers will be
  staged according to their size up until 1 September 2016.  Staging for
  large employers, with more than 120,000 employees, will begin in October
  2012, with staging for new and small businesses being delayed until
  later in the period;
• a second transitional period which will trigger further increases in
  employers’ and employees’ contributions has been deferred to 2017;
• following responses to the DWP’s consultation, the proposed rules to
  allow employers to self-certify their compliance with the required
  quality standards for defined contribution schemes have been withdrawn
  for the moment.

Auto-enrolment will begin as planned in October 2012 and will be
fully phased in by October 2017.

Commentary

New and smaller businesses will welcome the additional time allowed
before they are required to auto-enrol their employees into a pension
scheme.

However, employers operating defined contribution pension schemes
will be disappointed to note the withdrawal of the self-certification
rules.  The DWP has explained that it is currently seeking a long term
solution in conjunction with the pension industry but, unless a
replacement self-certification mechanism is proposed by the DWP,
employers with such schemes will be subjected to increased costs and
additional administrative burdens as a result of having to undertake a
full reconciliation of their records each year with the statutory
quality standard for these schemes.

Resources

The main regulations are set out below.  For details of the other
regulations, please visit:
http://www.dwp.gov.uk/policy/pensions-reform/latest-news

The
Pension (Automatic Enrolment) Regulations 2009: Government response to
the consultation

Consultation
paper on Workplace Pension Reform: Completing the Picture

The
Occupational and Personal Pension Schemes (Automatic Enrolment)
Regulations 2010

The
Employers’ Duties (Implementation) Regulations 2010

The
Employers’ Duties (Registration and Compliance) Regulations 2010

For
further information or to discuss the issues raised, please contact Guy
Abbiss (guy.abbiss@abbisscadres.com)
or Colina Greenway (colina.greenway@abbisscadres.com)
on +44 (0) 203 051 5711.