Workplace pensions have been making headlines recently with the government trying to make public sector workers work longer and pay more to get less in retirement. And private sector employers continue to cut back on quality schemes too. However, the new auto-enrolment regime is intended to push things in the other direction.
Government publicity for statutory auto-enrolment should bring the issue to the fore from early 2012 but detailed guidance has already issued by the Pensions Regulator. Statutory auto-enrolment is something union reps need to be ready for, influencing where possible the choice of scheme, anticipating any impact on existing schemes, and ensuring that members benefit from their employer’s new responsibilities.
Workers, particularly in the private sector, will be affected and will be looking to unions for information about the new arrangements or changes their employers are planning or making to existing pension provision. This booklet looks at the challenge of auto-enrolment and the broad range of new duties that will shape what employers do next, drawing on guidance published by the Pensions Regulator.
It examines the different kinds of pension scheme that employers may have, and how they qualify for use in auto-enrolment, particularly the defined contribution (DC) type likely to become more widespread, and the government-backed NEST scheme. It concludes by looking at what safeguards are available for workers and union members under auto-enrolment.
Pensions Regulator guidance
Detailed guidance covering all aspects of auto-enrolment is available from the Pensions Regulator (TPR) at: www.thepensionsregulator.gov.uk (due to be updated following Royal Assent to the Pensions Act). Guidance available as at October 2011 is reflected in this booklet.
1. Employer duties and defining the workforce (an introduction to the new employer duties).
2. Getting ready (first steps to prepare for the new employer duties).
3. Assessing the workforce (how to identify the different categories of workers).
4. Pension schemes (pension schemes under the new employer duties).
5. Automatic enrolment (an explanation of the automatic enrolment process).
6. Opting in and joining (How to process pension scheme membership outside of the automatic enrolment process).
7. Opting out (how to process “opt outs” from workers who want to leave a pension scheme).
8. Safeguarding individuals (the new safeguards).
9. Keeping records (records that must be kept by law under the new employer duties).
Legal framework for auto-enrolment
The Conservative-led coalition government is taking forward the auto-enrolment scheme set up by the last Labour government, but with certain changes, in particular those proposed by the Making Automatic Enrolment Work review. The Pensions Act 2011 modified the framework for auto-enrolment set by the Pensions Act 2008.
During 2011 the government also consulted on new regulations amending aspects of the earlier framework (Workplace Pension Reform — Completing the Legislative Framework for Automatic Enrolment, DWP July 2011). They were to be finalised in early 2012, coming into force before July 2012:
The draft Automatic Enrolment (Miscellaneous Amendments) Regulations 2011 deal with staging dates for very small businesses, early auto-enrolment for the largest employers, registration and compliance, and a range of other issues.
The draft Automatic Enrolment (Miscellaneous Amendments) (No. 2) Regulations 2011 deal with certification, special occupations, and the inclusion of seafarers and offshore workers.
Also covered are the draft Compromise Agreements (Pensions Act 2008) (Description of Person) Order 2011; the draft Automatic Enrolment (Offshore Employment) Order 2011; and draft Guidance for persons certifying money purchase, personal pension and certain hybrid schemes.
Earlier regulations (being amended in some cases) which remain relevant to the framework for statutory auto-enrolment include:
• The Occupational and Personal Pension Schemes (Automatic Enrolment) Regulations 2010 (SI2010 No.772) effective 1 October 2012 which deal with automatic enrolment and re-enrolment, opting in and opting out, minimum standards for qualifying pension schemes, and other issues.
• The Employers’ Duties (Implementation) Regulations 2010 (SI 2010 No.4) effective 1 September 2012 which deal with implementation (phasing-in DC minimum contributions and the transitional period for DB and hybrid schemes).
• The Employers’ Duties (Registration and Compliance) Regulations 2010 (SI 2010 No.5) effective 1 October 2012 which deal with registration, record-keeping and compliance action by the Regulator.
• Older affected regulations include the Occupational Pensions Schemes (Scheme Administration) Regulations 1996 (SI 1996 No.1715); and the Personal Pension Schemes (Payments by Employers) Regulations 2000 (SI 2000 No.2692).
Also relevant are the Public Interest Disclosure (Prescribed Persons) (Amendment) Order 2010 (SI 2010 No.7), effective from 1 October 2012, which amended an existing order to make sure that any detriment or dismissal a person suffers as a result of making a complaint to the Regulator is unlawful; and the Application of Pension Legislation to the National Employment Savings Trust Corporation Regulations 2011 (SI 2011 No.673) effective 6 April 2011, which amended the Pension Schemes (Investment) Regulations 2005 to allow for borrowing by the NEST Corporation.
Making automatic enrolment work
Changes to auto-enrolment arrangements proposed by the Making Automatic Enrolment Work Review (MAEW), set up by the coalition government, were incorporated into the Pensions Act 2011:
Earnings threshold: Originally £5,035, Pensions Act £7,475
Three-month waiting period: Originally no waiting period, Pensions Act option of up to a three month waiting period available to all employers
Early automatic enrolment for large employers in the first two “tranches”: Originally not able to enrol prior to October 2012, Pensions Act gave the option to enrol from July 2012
Flexibility around automatic re-enrolment: Originally one month, Pensions Act more flexible automatic enrolment timelines