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BeeHive  >  BeeLines  >  2009  >  March  >  11% of Qualifying Earnings

11% of Qualifying Earnings

Hmm!  And following on from yesterday’s BeeLine (8% of Qualifying Earnings)

I thought I’d go the whole hog and write about the myth of the 11% total pension contribution required from the so-called Quality Qualifying Workplace Pensions Schemes (QQWPSs) after 2012.

Those of you who’ve been following this latest set of outpourings from your friendly neighbourhood BeeHive will be aware that all employers will have to offer a Qualifying Workplace Pension Scheme (a QWPS, no less) from 2012 onwards.  2012, by the way, is the date from which pensions will become much more fun than they are today, or have ever been in the past.

From 2012 some employers may choose to offer their employees a sort of GTI version of a QWPS and, if so, the legislation looks like it will let them provide something called a Quality Qualifying Workplace Pension Scheme (a QQWPS).  To meet that quality mark a total annual contribution of 11% of ‘Qualifying Earnings’ will be required, with a minimum of 6% of ‘Qualifying Earnings’ being stumped up by the employer.

But, as I pointed out in yesterday’s BeeLine, ‘Qualifying Earnings’ are lower than an employee’s actual earnings; £5,035 lower in fact (as per the Pensions Act 2008).  The band of earnings that will count to meet both the ‘Qualifying’ and ‘Quality Qualifying’ benchmarks is between a minimum, currently £5,035 pa, and a maximum, currently £33,540 pa.

So, when employers find out that their schemes have to meet a total contribution level of 11% in order to achieve ‘quality’ status (which will bring with it a lower level of palaver when fulfilling their auto-enrolment duties – see Quality Qualifying Workplace Pension Schemes (QQWPSs)) they need not get too worked up about the 11% figure.  The most that someone on the maximum earnings level of £33,540 would have to have in total contributions would be just under 9.35% of actual earnings.  The minimum employer contribution of 6% of Qualifying Earnings would never be more than 5.1% of actual earnings.

That’s not so bad if it gets you the ‘quality’ mark is it?

Steve Bee

24 March 2009

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