Employers, 2012 and all that - Part II
As you've probably already worked out from the title of this BeeLine it's part two of the exciting series of BeeLines started yesterday (Part I) intended to explain the new requirements all employers in the UK will have imposed on them in 2012 by the Pensions Act of 2008.
If you thought the thrilling stuff in yesterday's prequel was something, by the way, just wait until you read today's instalment; it's something else!
So, here we go, a whole load of other things I think every employer in the UK should know about these upcoming pension laws:
* The story so far: in 2012, all employers will have to ensure all their eligible employees are 'auto-enrolled' into something called a 'Qualifying Workplace Pension' scheme. Just offering such a scheme won't do though, oh no, employers will actually be required to 'auto-enrol' their employees into schemes.
* Where the legislation says 'all' in that context it is intended to mean 'all'. So compulsory employer pension contributions will become payable for agency workers as well as regular employees.
* The contributions for agency workers will be paid by whoever pays their wages, but sometimes that's not that clear and in those cases the contributions must be made by whoever it is that actually pays them.
* As well as 'Qualifying' schemes there's going to be a new category of 'Quality' schemes.
* A 'Qualifying Workplace Pension' scheme can be either a Defined Contribution (DC) scheme, or a Defined Benefit (DB) scheme.
* A 'Qualifying' DC pension scheme will require a minimum contribution from the employer of 3% of the employees' banded earnings and a total overall contribution of at least 8% of employees' banded earnings.
* A 'Qualifying' DB pension scheme looks likely at this stage to be one that holds something called a 'contracting-out certificate' or is at least good enough to meet something called a 'test scheme standard'. At the moment that probably means such a scheme would need to provide a pension benefit based on an annual accrual rate of at least 1/120th of salary for an accrual period of no more than 40 years. All this could change in the run up to 2012, but the clever money's on it all going through as described here.
* A 'Quality' scheme is a sort of GTI version of a 'Qualifying' scheme that will enjoy a slightly more relaxed approach to 'auto-enrolment'.
* The main idea of auto-enrolment is that all eligible employees and workers will be auto-enrolled into pension schemes the day they become eligible - by starting work, or instance, or hitting their 22nd birthday. But 'Quality' schemes will be allowed to operate a three-month waiting period before auto-enrolling employees if that's what they want to do.
* 'Quality' schemes, like 'Qualifying' schemes, can be either Defined Benefit (DB) schemes or Defined Contribution (DC) schemes.
* The definition of 'Quality' schemes has been put off until further regulations can be cobbled together, but the odds are on something along the following lines being what we end up with:
* A 'Quality' DC scheme will likely be one that has an employer contribution rate of between 6% and 10% of employees' earnings.
* A 'Quality' DB scheme is likely to be one that has a pension accrual rate of at least 1/80th.
Phew! I'll bet loads of that will turn up in the pension exams one day don't you? But that's enough for now. I think you'll agree with me that this year's Pensions Act certainly qualifies as quality legislation. I'll definitely have to go for a part III of this series and maybe even a part IV and a part V. I haven't written them yet, so at this stage I can't tell. And I'm not the sort of person who plans work in that way anyway. I just write it and stop when I get fed up with it (or in this case just after the tannoy tells me my plane has got to the 'final call' stage of proceedings).
That's the deal with the BeeLines really, but you already know that. Part III later in the week I think. I know, but you'll have to wait - I've got some travelling to do right now and some conferences to speak at.
19 November 2008
Department for Work and Pensions - Personal accounts: a new way to save
Department for Work and Pensions - Personal accounts: a new way to save, Regulatory Impact Assessment, updated April 2008.
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