DEPARTMENT FOR WORK
AND PENSIONS News Release (Reference: PENS-087) issued by COI News
Distribution Service. 6 November 2008
New measures
designed to ease the administrative and financial burdens on
employers running pension schemes were announced today by Pensions
Minister, Rosie Winterton.
Following discussions with stakeholders, employers will now be
able to 'self certify' that their pension scheme meets
the quality standard based on the expected value of pension
contributions to be made over the course of each coming year.
The Bill states the quality standard for a money purchase scheme
is that members receive contributions of 8% of qualifying
earnings, of which 3% are made from the employer.
She also confirmed that the rates for the General Levy and the
PPF Administration Levy for 2009/10 would be frozen at this
year's level to avoid putting additional cost pressures on
pension schemes at the current time.
DWP Minister of State for Pensions, Rosie Winterton said:
"The Government understands the pressures that employers are
under at the present time and we are committed to helping them in
whatever way we can. These reforms are based on a broad consensus
among stakeholders. For our reforms to work it is vital that
wherever we can we make them as simple and straightforward for
employers to implement. This will be to their benefit and their employees.
"The amendments will mean that employers who are confident
their workers will receive the new minimum level over the year can
certify to this extent as opposed to doing so for each individual
over each pay period.
"By freezing the General and Administration levies at this
year's level I believe we are meeting the commitment we made
last year to provide levy cost stability for pension schemes."
DWP Minister, Lord McKenzie of Luton said:
"Over 2 million workers currently receive contributions at
or above the minimum laid out in the current Bill. We want this to
continue. The administration of the quality test is important, and
we certainly do not want the new arrangements to undermine
existing good provision. The introduction of certification is
specifically intended to reduce this risk."
Earlier this year, the Government amended the Pensions Bill at
the Lords Report stage, to enable employers to carryout the
quality test over a period of up to a year. It also confirmed the
position that it is the value of contributions going into pension
saving, not the method by which they are calculated, that
determines whether a scheme meets the test.
Following necessary checks, employers who are confident their
workers are on course to receive the new minimum level of pension
saving will be able to certify that their arrangements meet the
new quality standard. Once certified, employers will not be
required to make retrospective reconciliation payments if
contributions unexpectedly fall short, unless the detriment to an
individual exceeds certain minimum levels. These levels will be
set in such a way to protect individuals from significant,
systematic or persistent detriment.
The rates for the General Levy and the PPF Administration Levy
for 2009/10 will be frozen at this year's level. The General
Levy meets the administration costs of the Pensions Regulator, the
Pensions Ombudsman and the Pensions Advisory Service. The PPF
Administration Levy meets the running costs of the PPF. This
maintains the Government's intention, to provide levy cost
stability for pension schemes.
Notes for Editors:
1. The new minimum level of pension saving is due to come in to
force from 2012.
2. This decision follows a series of intensive discussions with
employer and pensions industry representatives about how to best
support employers in maintaining schemes that offer more generous
contributions than the minimum but which do not define pensionable
pay in the same way as qualifying earnings are defined in the Bill.
3. The certification procedure will be laid out in regulations.
The Government will continue the productive dialogue that has
developed with stakeholders when preparing draft regulations. The
regulations will then be issued for formal consultation next year.
4. Employers will only be able to certify if they are confident
that all members of the scheme are on course to receive the
minimum level of pension saving.
5. Employers that certify will not be required to make
retrospective reconciliation payments unless the detriment to an
individual exceeds a minimum threshold at the point of re-certification.
6. All qualifying schemes must meet the standard set out in
legislation. Personal Accounts will be a qualifying money
purchase scheme.
7. The new qualifying requirement/quality standard: the Bill
requires that each member of a qualifying money purchase scheme
receives contributions of at least 8% of qualifying earning or
equivalent, of which 3% must be paid by the employer.
8. Qualifying earnings: defined in the Bill as pay, including
basic pay, overtime, bonus and commission within an earnings band
of £5,035 to £33,540 in 2006/7 terms.
9. The administrative resource costs of these pensions
organisations are funded through grant in aid payments which are
in turn recovered through levies raised on eligible pension
schemes. The rates for the General Levy and the PPF Administration
Levy are reviewed annually.
10. The PPF Administration Levy funds the day-to-day
administration of the PPF fund and is calculated and payable based
on the numbers of members in eligible pension schemes. The
administrative costs of the Board of the PPF are funded separately
from the Pension Protection Fund which the Board manages.
11. The General Levy rates for 2009/10 covers the cost of several
organisations - the Pensions Regulator, the Pensions Ombudsman and
the Pensions Advisory Service - which play a vital role in
ensuring that scheme members' interests are safeguarded and
that members get good, impartial advice.
Public enquiries: 020 7712 2171
Website: http://www.dwp.gov.uk