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New Automatic Enrolment Regulations - The Final Countdown
The DWP started a consultation on automatic enrolment way back in July last year with some draft regulations. On the 1st of February, the DWP published the government response to that consultation, together with the final regulations.
Whilst there were no major surprises, the new regulations that have now been published put some of the final pieces in the automatic enrolment jigsaw. In no particular order, here are the highlights:
Postponement
Employers can postpone the automatic enrolment date (or assessment date) for up to 3 months. The draft regulations said that if employers wanted to do this, they would have to tell the worker within a week and a day of joining service, reaching age 22 etc. The new regulations now allow employers up to one month to tell their workers that their automatic enrolment date or assessment date has been postponed.
Certification
The draft regulations allowed employers to certify that their scheme complied with the minimum requirements by basing the contributions on pensionable pay, which must be at least basic pay. The certificate would be valid for 12 months. The new regulations now allow employers to certify for an 18 month period. In addition, they attempt to clarify exactly what they mean by ‘basic pay'.
Basic pay includes:
- Jobholder’s earnings before any deductions
- Holiday pay, and
- Statutory benefits such as Statutory Sick Pay, Maternity Pay, Paternity Pay and adoption pay delivered via payroll.
Basic pay need not include:
- Bonuses
- Overtime
- Commission
- Car allowances
- Clothing allowances
- Meal allowances
- Shift allowances
- Allowances for health and safety – e.g. fire warden
- Relocation allowances
The DWP makes the point that this list is not exhaustive and employers will need to check the regulations, guidance and/or seek legal advice to determine if particular elements of pay should/need not be included.
Other stuff
The ‘Person A’ rules have been abolished. This basically means that instead of employers having to use two processes to identify earnings for people who have relatively low fluctuating earnings, they only have to use one. ‘Micro employers’ used to be defined as those with less than 10 full time employees but part of a PAYE scheme with more than 239 people. Their staging dates were pushed back a bit. With the announcement that all staging dates have been put back by about a year for smaller employers, there’s no need to define ‘micro employers’ anymore, so they didn’t make the final cut.
What's next?
There are still a couple of pieces required to complete the automatic enrolment jigsaw. First of all we need to know what the qualifying earnings band and automatic enrolment triggers will be. And secondly, we still await details of the exact staging dates. We should get the remaining bits over the next month or so and at long last, we will have absolute certainty.
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About the author
Jamie Clark
Business Development Manager
A self-confessed ‘Pensions Geek’, Jamie reads Pensions Acts for breakfast. He’s spent the last two years working on automatic enrolment and has talked to hundreds of advisers and employers about how they can best prepare.
Stay up to date with Jamie (@RetirementView) on Twitter.
The views in this blog are the opinion of the author. They are based on their interpretation of industry developments and current understanding of UK proposed and actual legislation, and should not be interpreted as recommendations or advice.
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