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DWP to allow non-UK schemes for auto-enrolment

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  • DWP to allow non-UK schemes for auto-enrolment

UK - The government has confirmed non-UK pension schemes can be used for auto-enrolment purposes from 2012, although it stressed it would amend regulations to exclude non-European Economic Area (EEA) schemes if there are suggestions of an unacceptable risk to member benefits.

In its consultation on the latest set of draft regulations entitled 'Workplace Pension Reforms - completing the picture', the Department for Work and Pensions (DWP) noted some employers may wish to use schemes established outside of the UK as the qualifying schemes, especially for multi-national employers.

It is therefore proposed that all non-UK schemes which meet the quality requirements applicable to UK schemes - minimum 8% contribution of banded earnings - will be eligible for auto-enrolment providing they meet two additional criteria to "bring them into line with what would be expected of UK schemes":

The scheme must provide an income for retirement, and The scheme must be regulated by a regulatory body.

On the issue of tax relief, the DWP said it had rejected plans to require schemes to be tax recognised in the country of origin, as this would not entitle staff to tax relief on UK earnings except under specific taxation relief arrangements,

Instead, the consultation proposes that to ensure individuals receive the full 8% of contributions on qualifying earnings "employers are required to make up the 'missing' tax relief where they choose to use a non-UK scheme that is not eligible for UK tax relief".

Meanwhile, the government did express concerns, shared by the Pensions Regulator (TPR), over potential risks to members auto-enrolled in non-UK schemes, and specifically non-EEA schemes, that are not bound by directives or treaties allowing TPR to protect members' benefits.

It warned while the consultation presumes these schemes will be eligible for auto-enrolment, "given the risks involved and the need to act quickly if we do conclude there is an unacceptable risk, DWP will amend the regulations to exclude these non-EEA schemes if the evidence suggests that an unacceptable risk is emerging".

The consultation on the proposed regulations will close on 5 November and submissions should be sent to the DWP by post or email.

If you have any comments you would like to add to this or any other story, contact Nyree Stewart on + 44 (0)20 7261 4618 or email nyree.stewart@ipe.com

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