UK - Occupational schemes which offer an employer contribution of at least 6% could be allowed a three-month waiting period before auto-enrolling employees, the government has confirmed.
During a recent meeting of the Pensions Bill Select Committee Mike O'Brien, minister for pensions reform, told MPs under the new regime of personal accounts, scheduled for 2012, employers will have to auto-enrol workers into a qualifying pension scheme "from day one".
But he confirmed in an attempt to minimise the "possible disruption to current good-quality pension provision" the government is planning to allow an exemption in "certain circumstances" where an employer contributes at least 6% to the scheme.
O'Brien claimed some existing schemes, such as the one run by the supermarket Tesco, wait for workers to be employed for a year before they are automatically-enrolled, however he said a year was "rather a long time, and we would rather have a period of three months".
That said, the minister pointed out a time frame would not be included in the amendment to the Pensions Bill as the government wants to discuss it with employers to "consider the sort of period that will be best for ensuring that we keep a good quality provision". It is said there could be an argument for employers who make a contribution of between 12% to14% to have a longer deferral period.
"We want to give ourselves flexibility in the coming months or possibly even a year or so. To have such a discussion would ensure that we get the detail of regulations right. Three months is the sort of period we are considering as a reasonable maximum but I am not being dogmatic about that," added O'Brien.
He claimed the provision would particularly benefit employers who have a high turnover of staff, and revealed a 6% level of contributions had been chosen, over proposals for 9% or 10%, to minimise the opportunities for people to "level down" existing provision, as the "less we require employers who have reasonable provision to do, the better in terms of levelling down".
In addition, O'Brien confirmed the process would be self-certified by the employer, which means the rules will be "clear and straightforward" so the scheme sponsor can make an informed decision about waiting periods.
But Standard Life notes the overall level of saving would still be the personal accounts minimum of 8% of banded earnings as the proposal to allow waiting periods would be available to schemes offering 6% contributions even if employees were only contributing 2% .
Andrew Tully, marketing technical manager at Standard Life, admitted the proposal will allow many employers to continue operating waiting periods within existing schemes and will help limit the number of employers who will make changes to their schemes, either through closure or reducing contributions.
But he warned: "If the aim is to encourage better pension provision in the UK, it seems questionable why one scheme offering 8% contribution should be allowed to operate a waiting period while another with the same rate cannot. It would seem more sensible to require a higher total contribution before a waiting period can be used."
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