Delays and extensions the name of the game for 2012 reforms

The Government has issued amended draft regulations today regarding the 2012 pensions reform changes, with further delays and extensions the common theme.

The final rules for the Government’s pensions reform were put before Parliament on Tuesday January 12, 2010, and featured several changes to the draft regulations following a consultation on the original draft in autumn 2009.

The 2012 pensions reforms will now see those who employ less than 50 workers not having to automatically enrol workers into a qualifying pension scheme until sometime between March 2014 and February 2016. New companies setting up after 2012 will also have the time until they need to enrol staff extended, to some date between March and September 2016. Originally, small employers would have taken on their duties in groups at some point between October 2013 and April 2015, and new companies established after October 2012 would have had to enrol staff between April and October 2015.

As well as delays, the amended reforms also feature extensions, with the time that new employees have to be enrolled onto the scheme increased from 14 days to within one month of starting work. The employee is then entitled to a further month in which they may opt out and be treated as never having enrolled as a member. This timescale and process will apply to all types of pension scheme.

The Government’s current ‘19-day rule’, in which time employers must pass pension contributions onto the scheme, has also extended to allow the employer to hold onto contributions for new joiners until the end of the second month. This takes into account the possibility of an employee opting out, and makes reforms simpler, quicker and cheaper for those who do decide to opt out.

The final amendment regards the Government’s recently re-branded National Employment Savings Trust (NEST) scheme, which will not be allowed to accept transfers from other pension schemes, nor allow member to transfer out, in an effort to ensure the scheme is targeted at low and medium earners without any pension provision. Workers will, however, be eligible to transfer these benefits to another regulated pension scheme from retirement age of 55 onwards.

“The changes announced today show that the Government has listened to businesses,” commented Katja Hall, Confederation for British Industry (CBI) director of employment policy. “However, discussions are still taking place about how these reforms will affect firms with existing pension schemes. The Government needs to ensure it does not make the system too onerous for companies who are already doing more than the law will require, or it could encourage them to cut contributions to the legal minimum.”

Andrew Tully, senior pensions policy manager at Standard Life, added: “It is positive that the Government has taken on board employer and industry concerns, and amended their original proposals. Having the same process for trust and contract schemes aids simplicity. And allowing employers more time before they have to pass contributions will reduce the number of refunds which need to be made, saving cost and complexity.”

Source:  Sophie Baker      Pensions age

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