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UK government proposes changes to draft regulation on auto-enrolment

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  • UK government proposes changes to draft regulation on auto-enrolment

UK - The UK government has proposed several changes to draft regulations on auto-enrolment following a consultation and says responses to the planned rules were generally favourable.

The Department for Work and Pensions (DWP) published its response to the consultation on workplace pension reform, launched in July 2011.

On the issue of certification - a process by which employers can verify their workplace pensions are adequate - the department said it would amend the definition of basic pay.

This would specifically exclude bonuses, overtime, commission, car and some other allowances, it said.

The DWP also said it would extend the validity period of a certificate from to 18 from 12 months.

Under the new version of the proposed regulations, the 'Person A' test would be abolished.

Most stakeholders thought the test - aimed at smoothing pensionable income to avoid pay spikes triggering automatic enrolment for the low paid - should be scrapped, the department said.

The problem it sought to address was seen as remaining anyway, and it was also thought that the rule could still give rise to some anomalies.

Information requirements for employers making use of the transitional arrangements for defined benefit and hybrid occupational pension schemes will be simplified in the new version of the regulations.

The notice period and enrolment information period will be aligned at one month, in common with other automatic enrolment provisions, the department said.

Regarding waiting periods, the DWP proposed extending the prescribed period for issuing a notice from one week to one month, beginning with the day after the starting day, for both the initial and any second waiting period.

It also said that, because larger employers will already have started to prepare for automatic enrolment and need certainty about their staging date, the revised draft regulations would not affect any staging date on or before 1 February 2014.

"Any employer with a staging date from October 2012 to 1 February 2014 will retain their original date," the DWP said.

The government said the response to the proposals had been favourable overall, with comments aimed at specific features rather than the fundamental principles of the reforms.

Commenting on the government's response to the proposed regulations, consultancy Hymans Robertson said there were some welcome amendments.

Lee Hollingworth, head of DC, said: "The DWP has wisely amended the definition of what is deemed to be 'basic pay' under the certification requirements to specifically exclude items such as commissions and certain allowances.

"Without this amendment, the certification process would have been wholly irrelevant for the vast majority of employers who do not currently deem a car and other allowances as pensionable."

The relaxation of the time allowed to issue the postponement notice to one month was also good news, he said, particularly for employers with centralised HR serving many different locations.

With just nine months to go to auto-enrolment launch day for the biggest companies, the clock is now ticking, Hollingworth said.

"Preparing for auto-enrolment is a complex, five-step process that needs at least 18 months of dedicated time to achieve satisfactorily," he said.

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