The Association of British Insurers (ABI) says concerns for the future of workplace pension schemes remain despite amendments to the Pensions Bill.
New Pensions Minister Rosie Winterton today unveiled plans enabling employers to ‘self-certify’ their schemes meet the quality standard based on a projected value of contributions for the year ahead.
Campaigners, the ABI among them, welcome employer self-certification, arguing it will help stave off a “levelling down” of existing contributions once personal accounts are officially introduced in 2012.
But the ABI adds today’s changes still risk discouraging employers from committing to providing good quality workplace schemes.
“The current drafting of the amendment adds considerably to the administrative burden for employers,” Maggie Craig, ABI director of life and savings, says.
“It risks discouraging them from continuing to provide pensions to their employees that have higher contributions than the level set for personal accounts. We sincerely hope that this issue can be resolved.”
Rachel Vahey, head of pensions development at Aegon UK, says forcing employers through "bureaucratic hoops" could lead to them levelling down to the Government benchmark, meaning low earners could be hit hardest.
"The concept of self-certification, if it works well, could go a long way to resolving this dilemma," Vahey adds. "Although the principle is sound, we need to understand how the new proposals will work in practice and whether they will eradicate the need for yearly calculations, before welcoming this change with open arms.
"We also need to guard against adverse employer behaviours. Often employers have a wide range of employees within their workforce and forcing changes for just one or two could mean changing the scheme wholesale, with the unintended consequence that many others will lose out considerably."
Today’s Pension Bill changes follow discussions with stakeholders, Winterton said. They mean the quality standard for a money purchase scheme is for members to receive contributions of 8% of qualifying earnings, with 3% of that coming from the employer.
“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, Winterton, who replaced Mike O’Brien as Pension Ministers a month ago, said.
“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.”
Self-certification is one of a number of issues, which also include means-testing and public subsidies, concerning providers ahead of the introduction of personal accounts.
020 7484 9791
Sector is changing
Offer stands until 31 December
Lisa used as 'top-up'
Two FCA consultation papers
Transfer from PPP to SIPP