The Pensions Act 2008 laid the foundations for the latest attempt to tackle the looming pensions crisis. Since then, there has been a plethora of draft regulations issued for consultation, setting out the proposed basis for the personal accounts scheme and the requirement for auto-enrolment of workers into suitable pension arrangements. The latest set of consultation documents was issued in September.
While the details are not yet finalised, now seems an ideal opportunity to review where we are on personal accounts and the key features of the proposed auto-enrolment regime. Before analysing any detail, it may help to clarify some of the terminology used:
- Job holder: Broadly, any worker aged at least 16 and under 75 with 'qualifying earnings' of between £5,035 and £33,450 a year (based on 2006-07 earnings and up-rated annually).
- PADA: The Personal Accounts Delivery Authority is a non-departmental public body accountable to Parliament, which will set up a national trust-based pension scheme called the personal accounts scheme.
- Qualifying workplace pension scheme: An umbrella term covering defined benefit or defined contribution schemes that are operated by an employer and certified as meeting certain criteria (an employer may offer its own qualifying workplace pension scheme instead of the personal accounts scheme).
The proposals state that job holders aged between 22 and the state pension age will be eligible for auto-enrolment into either the personal accounts scheme or a qualifying workplace pension scheme. Following a recent Department for Work and Pensions (DWP) change to earlier proposals, the requirement will now be staged over a three-year period from 2012, with the largest employers (those employing more than 250 employees) becoming subject to the requirement first. So-called micro employers (those employing one to four employees) will be required to comply by 2015.
The staged introduction aims to alleviate concerns that PADA and the Pensions Regulator (as compliance monitor for the new requirements) would be unable to cope with a 'big-bang' approach. It is also hoped that the staged introduction will assist smaller employers by providing more time f