Quality Qualifying Workplace Pension Schemes (QQWPSs)
Oh good! New acronyms for us to play with! Those of you who have been reading this latest set of BeeLines covering the draft regulations governing auto-enrolment will know already that come 2012 all employers in the land will be required to provide a Qualifying Workplace Pension Scheme (a QWPS) for their employees.
A Qualifying Workplace Pension Scheme will be one that matches certain criteria, particularly in regard to the level of pension saving imposed. Broadly speaking a Qualifying Workplace Pension Scheme will need an overall contribution of 8% of qualifying earnings. A typical QWPS will match the Personal Accounts contribution shape of 3% from the employer, 4% from the employee and 1% from the taxman grossing the employee’s contribution up for basic rate relief. The Personal Accounts scheme, as you may know, will itself be a massive QWPS that is being built to act as a default option for employers who don’t set up their own QWPSs.
Those of you who read Tuesday’s BeeLine on the ins and outs of auto-enrolment (The Pensions Hokey-Cokey) may agree with me that the daily requirement to monitor auto-enrolment may be seen as a bit of a palaver by some employers, particularly once the initial novelty has worn off. Well, there’s good news of sorts for such employers tucked away in the draft regs. Employers will have the option of postponing auto-enrolment for period of 90 calendar days and thus cutting out some of the palaver if they are prepared to run schemes that meet a ‘quality’ mark.
Schemes that achieve the quality mark will be called Quality Qualifying Workplace Pension Schemes (QQWPSs) and can be thought of as a sort of GTI version of a QWPS.
The regulations say that all existing defined benefit schemes that currently meet something called the Reference Scheme Test will be classified as QQWPSs. For defined contribution schemes, both occupational and personal pension based arrangements, the quality mark can be achieved if the total contribution to the scheme is 11% of qualifying earnings, with the employer paying at least 6% of that. A typical contribution shape for a defined contribution QQWPS (a DCQQWPS?) may then well be something like a 6% employer contribution, a 4% employee contribution and an additional 1% from the taxman to gross-up the employee’s 4%.
The draft regs say that employers using the Personal Accounts QWPS (the PADCQWPS?) will not be able to take advantage of the postponement period as the postponent policy is intended as an incentive for employers to continue existing higher-level provision, or presumably, to establish higher-level provision in the run-up to 2012.
Anyway I’d better get on with reading these draft regs to see what other goodies I can find for you in there. It’s all exciting stuff isn’t it?
20 March 2009
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