New Pensions Bill to make final changes to workplace pensions and automatic enrolmentFriday, January 21st, 2011
The latest Pensions Bill was introduced in the House of Lords on 12 January. The two key areas of interest are
- the revised timetables for increasing the State Pension age for women to 65, and for both men and women to 66, and
- amendments to the existing provisions in the Pensions Act 2008 for the introduction of workplace pensions, including mandatory employer contributions and automatic enrolment of employees.
The following notes describe relevant changes in the Bill, some of which have already been considered in earlier newsletters. Changes specific to pension scheme management are not mentioned.
- The timetable for increasing the State Pension age for women to 64 and 65 is shortened so that is achieved between April 2016 and November 2018. There is no change to the timetable for the increase from 60 to 63 between April 2010 and April 2016.
- The timetable for increasing the State Pension age for both men and women to 66 is achieved between November 2018 and April 2020.
- A jobholder will not be eligible for automatic enrolment or, with some exceptions, re-enrolment unless, in addition to complying with the lower and upper age limits, the jobholder earns more than £7,475 per annum (the “earnings trigger”) in a pay reference period, pro-rata for pay reference periods that are shorter or longer than 12 months.
- However, automatic re-enrolment continues to be a requirement even though the earnings trigger does not apply if a jobholder ceases to be an active member due to an action or omission on the part of the employer or due to the jobholder at some earlier time failing to meet a qualifying condition, such as employment outside of Great Britain or not having sufficient qualifying earnings.
- An optional waiting period is introduced into the automatic enrolment process. This allows employers to defer the automatic enrolment date of workers for up to three months by providing them with a “deferral notice” that contains specified information. The notice must state that the employer intends to use a waiting period, together with details of the worker’s new enrolment date.
The waiting period may apply from one of three dates:
- the employer’s staging date,
- the worker’s first day of employment with the employer, where that falls after the employer’s staging date, or
- the first day on which a worker is eligible for automatic enrolment while employed by the employer.
In the first two cases, the employer does not have to check the worker’s eligibility to be automatically enrolled before applying the waiting period. In all cases the employer must confirm the workers’ eligibility at the end of the waiting period before automatically enrolling them.
A jobholder may opt in during the waiting period.
- Regulations must limit the period of time in which re-enrolment may occur to either three years in the case of a jobholder, or two years and nine months (changed from three years) in the case of an employer.
- The automatic enrolment earnings trigger and the upper and lower limits of the qualifying earnings band (QEB) will be reviewed annually, taking into account national insurance earnings limits and thresholds, the income tax personal allowances, the level of basic state pension for single adults, the general level of prices and earnings, or any other factors that are considered relevant. Any changes will be made each year by statutory order. Pro-rata values, e.g. weekly or monthly values, may be specified and no rounding rules are imposed.
- Employers using money purchase occupational pension schemes, personal pension schemes or certain types of hybrid schemes to discharge their enrolment duties will be able to use new alternative procedures, to be prescribed in regulations, to certify that their scheme satisfies the relevant quality requirements for their particular type of scheme.