The auto-enrolment landscape seems to have been ever changing over the last few years. We look at some recent amendments introduced to lessen the burden on employers.
Following a consultation earlier this year, the Occupational and Personal Pension Schemes (Automatic Enrolment) (Miscellaneous Amendments) Regulations 2016 (the “Regulations”) came into force on 6 April 2016, with the aim of easing the burden on employers in relation to auto-enrolment.
In brief, the Regulations:
- simplify the process of bringing forward a staging date for employers. The Regulations remove the requirement to secure trustees’ agreement to bring forward the staging date (to any date in the month) where an employer does not have any eligible jobholders to automatically enrol. Further, an employer no longer needs to provide the Pensions Regulator with one month’s notice to bring their staging date forward. An employer will be able to give notice at any point up to and including their new early automatic enrolment date, that it wishes to bring its staging date forward.
- simplify the process for employers to re-declare compliance (which will apply whether or not the employer has any jobholders to re-enrol on the automatic enrolment date). An employer needs to send its re-declaration of compliance to the Pensions Regulator within five months, beginning with the third anniversary of the employer’s staging date (or any previous automatic re-enrolment date).
- simplify certain procedural requirements, by creating exemptions from the duty to automatically enrol directors of director-only companies or directors of companies who employ workers; and members of limited liability partnerships who are not treated for income tax purposes as being employed by the partnership. Please note that where a company employs one or more workers in addition to its directors, those workers who are eligible jobholders will still have to be automatically enrolled into a pension scheme.
- clarify the current exception from the duty to automatically enrol workers who received winding up lump sums. Where a worker has been paid a winding up lump sum and within the next 12 months after payment of that sum, ceases to be employed and is re-employed by the same employer but becomes eligible for automatic enrolment, the employer’s duty to automatically enrol or re-enrol a worker or jobholder is turned into a discretion.
- provide a transitional period for employers who provide defined benefit schemes in formerly contracted-out schemes, so that they can use an alternative quality requirement for automatic enrolment purposes, based on the cost of accruals test, following the ending of contracting out, which will be available until the earlier of 5 April 2019, or the date of the first report signed by the actuary after 5 April 2016 that breaks the cost of accruals down to benefit scale level.
Finally, we understand that regulations will be introduced in the near future to extend the current exception to the employer duty to automatically enrol in respect of individuals with tax protected status, so as to cover individuals with Fixed Protection 2016 and Individual Protection 2016.
If you have any questions or would like more information, please contact a member of our pensions team.This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.