Independent Financial Advisers Glasgow News & Guides

Pensions experts have identified a shopping list of key areas where the Government needs to focus its energies if it is to meet its Red Tape Challenge and reinvigorate workplace pensions.

These include the overly prescriptive rules on the type of pensions employers need to offer, and how employers communicate with the members of their pension schemes.

Responding to the Government’s “Pensions Spotlight”, the National Association of Pension Funds (NAPF) has called on the Government to seize the moment by streamlining regulations. It added that the Government needs to ensure that the regulatory regime for pensions protects members’ interests while not imposing unnecessary burdens on employers who are providing good quality pensions to their workforce.

Joanne Segars, NAPF Chief Executive, said:

“We welcome that the Government is taking a long hard look at pensions regulation. This is a positive first step in its wider commitment to reinvigorate workplace pensions.

“We need a regulatory system that protects members’ interests, whilst also supporting good quality workplace pensions.”

Six months to go until Automatic Enrolment begins and new figures show that final salary pension scheme payouts will reach a record high and peak this year.

Statistics from the Department for Work and Pensions show that the average amount paid from Defined Benefit (DB) schemes will reach the highest ever level this year and the amount will fall thereafter.

The average DB pension in payment will peak at around £7,100 a year towards the end of 2012 and will fall to just above £2,400 a year by 2060, marking a significant shift in pensions saving.

Currently, around six million pensioners benefit from some form of DB scheme but only 10% of firms have final-salary schemes that are still open. Workplace pension reform will bring up to ten million people into pension saving from this year.

Starting in October, people working for the largest employers will be automatically enrolled into a workplace pension scheme. Smaller businesses will follow. Individuals, employers and the Government will all contribute to an employee’s pension.

The final building blocks for automatic enrolment have been put in place as the Government published its response to the consultation on the earnings threshold.

With just over six months to go before the largest employers begin enrolling eligible workers into pension savings, the response sets out that automatic enrolment rates for the next tax year will be aligned with tax and National Insurance thresholds. This will make it easier for firms who will not have to negotiate another layer of complexity.

Minister for Pensions Steve Webb said:

"The overwhelming response to our consultation was the call to align the automatic enrolment trigger with existing payroll thresholds. This will help firms make a success of these reforms, as they will be able to better understand who is eligible to be enrolled.

"These changes strike the right balance between getting as many people into workplace pension saving as possible and ensuring that we do not enrol some people who would not financially benefit from saving. People who are excluded from automatic enrolment will still be able to opt themselves in, benefiting from a contribution from their employer.

The new, single tier State Pension announced in the Budget will dramatically improve savings incentives for people on a low income."

The Government must review the rates each tax year.

The Department for Work and Pensions (DWP) has published a package of regulations to help employers prepare for automatic enrolment into workplace pensions. 

This package, alongside the revised timetable for automatic enrolment published last week, is designed to make it easier for business to manage their new duties. With these regulations in place, the legislative framework underpinning these reforms is now almost complete.

The DWP has also published the Government’s response to the consultation published last summer on workplace pension reform regulations, and guidance on certifying pension schemes.

The consultation looked at arrangements to put into effect the remaining recommendations of the Making Automatic Enrolment Work Review on optional waiting periods and simplification of the certification process.

It also covered new statutory instruments on special occupations not included previously; seafarers, offshore workers and police not under a contract of employment.

A revised timetable for automatic enrolment was published on 25th January, giving employers clarity and certainty about their starting dates.

This followed the announcement, in November, that small firms would be given more time to prepare for automatic enrolment to help them out in exceptionally tough economic times.

A recent survey by the Chartered Institute of Personnel and Development has found that while the majority (75%) of employers are fully aware of imminent changes to workplace pension schemes, not as many are prepared for auto-enrolment - less than one third (32%) of employers know the date on which the new rules will apply to them.

The Government has confirmed that automatic enrolment will begin on time in autumn 2012 and all employers will remain in scope.

The Government must not make a u-turn on its plans to start automatically enrolling all workers into a pension from next year, the National Association of Pension Funds (NAPF) has warned.