Automatic Enrolment (Transitional Provisions)

Wednesday 19th December 2012 Written Statements

[The Minister of State, Department for Work and Pensions (Steve Webb)]

The workplace pension reforms are a hugely important part of the Government’s commitment to secure and protect people’s income in retirement. As part of the automatic enrolment process, it is vital that employers comply with the spirit as well as the letter of the law.

The Government therefore intend to introduce legislation at the earliest opportunity to clarify the law and to provide certainty by preventing the avoidance of the automatic enrolment duty through the exploitation of an easement aimed only at employers who provide defined benefits under hybrid schemes or defined benefit schemes. Our intention is for the legislation to have retrospective effect from the date of this announcement.

The legislation will make it clear that only defined benefits (whether offered under a hybrid scheme or a defined benefit scheme) offered to the jobholder in question would satisfy the pre-conditions for employers to defer automatic enrolment under section 30(2) of the Pensions Act 2008. The legislation will amend the provisions of that Act relating to the transitional period for defined benefit and hybrid schemes, as well as the definitions of “hybrid scheme” and “defined benefit scheme”.

We intend for the legislation to have retrospective effect. Any employer who offers only money purchase benefits to the jobholder and has issued a notice to them to defer automatic enrolment under section 30 will need to automatically enrol that jobholder and backdate employer contributions to the date of this announcement. From the date the legislation comes into force, any employers who will be affected by the legislative change will be required to make back payments covering the period from the date of this announcement. It will be the jobholder’s choice as to whether or not they wish to pay their own contributions for this period. Where jobholders wish to make contributions, employers and schemes will need to allow these to be made over an extended period.

Employers offering money purchase benefits will still be able to use the transitional arrangements under section 29, which permit a gradual phasing in of the contribution requirements over a transitional period.