UK: New Employer Duties To Provide Pension Benefits

The Government has published today a number of sets of draft Regulations relating to the new obligation on employers to automatically enrol employees into a minimum standard pension scheme. The draft regulations provide a much clearer picture of how this obligation will operate in practice.

The consultation document confirms that the new regime will be phased in over three years. The largest employers, judged by PAYE scheme size, will be the first to be subject to the auto-enrolment obligation, starting from April 2012. Small employers may avoid the requirements until April 2015.

The draft Regulations give more detail about how employers can certify existing pension arrangements as satisfying the minimum quality requirements. This includes scope to certify an arrangement where up to 10% of members fall below the minimum standard provided no individual member falls more than 5% below that standard. This is likely to be helpful for defined contribution schemes where contributions are currently based on basic pay rather than total earnings.

The consultation document includes a revised draft of the auto-enrolment Regulations issued earlier in the year. The Government has listened to some of the criticism of how prescriptive the requirements were under the first draft and so, in the revised draft, it has relaxed some of the requirements. This includes extending the joining window from 14 days to 1 month and making it easier to deal with contribution refunds when employees wish to opt out of the scheme.

The consultation documents can be found here.

Consultation has been accelerated so that responses are required by 5 November.

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq

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The original publication date for this article was 24/09/2009.