The Government's programme for automatic enrolment of the majority of UK employees into a pension scheme is rolling. and gathering pace. The largest employers have already been drawn in, and companies at lower levels are successively being submerged in the flow. But the point is to avoid complete submersion, and to swim with this particular tide, by knowing the ropes in advance. Aries gives you the full briefing, and keeps you in the picture as the successive waves hit the shore. Contact us on the form below if you need to know more.
POT FOLLOWS MEMBER
The successful rollout of automatic enrolment leaves the spectre of a future headache for the pensions industry: dormant pension pots, predicted to amount to £50 million by 2050. The Government has sought to tackle this issue via the Pensions Act 2014 which provides for Regulations to require that, in certain circumstances, the cash equivalent of a person's accrued rights must be transferred - dubbed an 'automatic transfer'.
Updating proposals which originally surfaced in 2013, the Government published a policy paper in February analysing the different implementation options and providing some specific detail about the technical aspects.
The Government prefers a 'federated' model of implementation seeing a network of interoperable registers which will store and match information about eligible small pots. This approach is the result of work undertaken with a stakeholder working group in 2014.
In its own words, the Government is mindful that this "marks a departure" from the original proposals (for a centralised database) and further work will take place to ensure this new model aligns with the legislative powers under Schedule 17 of the Pensions Act 2014, prior to implementation.
It is proposed that automatic transfers should take place where the member is saving into a charge-capped default arrangement, as defined in the (currently draft) Charges and Governance Regulations, in both the ceding and receiving scheme. This safeguards members' interests both in avoiding transferring funds where the member has been actively involved in making investment choices and in ensuring members will only be automatically transferred into low-charging funds. All additional voluntary contributions are excluded from automatically transferring except where these are into a fund which is designated as a default arrangement for another employee of the member's employer.
AUTO ENROLMENT EXEMPTIONS
Although there is currently no scope to exclude any eligible workers from automatic enrolment, draft regulations expected to come into effect from April 2015 look to exempt three categories of workers from automatic enrolment:
- individuals leaving employment
- former members
- individuals with tax protected status for existing pension savings
Individuals leaving employment
Draft reg 5B in SI 2010/772 will allow the employer to choose whether or not to automatically enrol any individuals who would otherwise be eligible, but are in a notice period when the duty arises (ie. from resignation, dismissal or retirement) or where they give notice at any time up to 6 weeks after the auto enrolment duty has arisen. This also applies to jobholders and workers who would normally have a right to opt in.
For a scheme leaver, draft reg 5C gives the employer the option to omit from the auto enrolment process where the employee has left a qualifying scheme within the previous 12 months. So the next time the employee would be enrolled would be when the next re-enrolment date arises.
Individuals with tax protected status
Individuals with savings above the current LTA may be protected from tax charges under enhanced or fixed protection, provided no further tax-relieved pension contributions are made. Draft reg 5D would allow employers who have reasonable grounds to believe that certain employees have tax protected status to exempt these employees from automatic enrolment.
[Draft Occupational and Personal Pension Schemes (Automatic Enrolment) (Amendment) Regulations 2015, Reg 5]
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