A series of amendments are being made to the auto-enrolment regime this month. With effect from today (1 April 2014), the second phase of amendments to the secondary legislation come into force and extend the deadlines for employers to comply with their employer duties from one month to six weeks.
Second phase of legislative amendments to workplace pension reform
The secondary legislation that sets out the detail on how workplace pension reform works was subject to two phases of amendment in the Automatic Enrolment (Miscellaneous Amendment) Regulations 2013.
The first phase (covering definition of pay reference periods, retention periods, opt out notices and test scheme standard for DB schemes) applied from 1 November 2013.
The second phase will apply from today. With effect from 1 April 2014, the deadlines for employers to provide:
- information to individuals on their opt in rights;
- information to individuals on their joining rights;
- postponement notices;
- the auto-enrolment joining window; and
- deadlines for registration
are extended from one month to six weeks.
It is worth noting that the worker opt out period stays at one month.
Changes to the threshold and limit amounts
The earnings figures used for worker assessment and calculating contributions under workplace pension reform are reviewed annually by the Secretary of State for Work and Pensions. The result of the review is usually announced in November / December of each year and will then take effect at the start of the following tax year.
The thresholds for 2014/15 will therefore apply with 6 April 2014 as follows:
- £10,000 for the auto-enrolment earnings trigger (from £9,440 in 2013/14);
- £5,772 for the lower limit of the qualifying earnings band (from £5,668 in 2013/14);
- £41,450 for the upper limit of the qualifying earnings band (from £41,865 in 2013/14).
These are the annual figures. In most cases, these will need to be broken down to the right pay reference period level. These have also been amended in line with the annual figures as follows:
|Auto-enrolment earnings trigger
|Lower limit of the qualifying earnings band
|Upper limit of the qualifying earnings band
It is worth noting that the levels remain linked to the income tax earnings threshold and the lower and upper limits for National Insurance Contributions.
Government response to consultation on exemption of certain categories of workers
In addition, the government issued its response to consultation on the exemption of certain categories of workers from the scope of auto-enrolment.
This does not change any of the legislation, but does provide a useful summary of the current status of the Department for Work and Pension's thinking on the key issues surrounding worker assessment. The main takeaway points are:
- the government will provide an exemption for individuals with tax-protected pension savings. This is likely to apply only if the employer has knowledge of the individual's status (i.e. it will not be a blanket exemption for individuals with tax-protected pension savings);
- the government will provide an exemption for individuals who have issued notice (either to resign or that they are retiring);
- the government will not provide any other exemptions (e.g. for workers on long term sick leave, non-UK tax payers or non-UK domiciled or for specific industries); and
- legislation will be forthcoming so that if an individual opts out after being contractually enrolled they will not be subject to a possible auto-enrolment. Instead, they will be swept up at the next applicable re-enrolment date.
Employers and pension scheme managers will need to consider the following action points:
- do communications need to be updated to reflect the correct timescales and earnings thresholds and limits?
- do any auto-enrolment processes need to be updated to reflect the amended earnings triggers?
- do pension contribution calculations need to be amended in line with the changes to qualifying earnings?
- can the employer or pension scheme make use of the extended time limits to make any auto-enrolment processes easier or more accurate?