Article 3: Reviewing existing pension arrangements
The Pensions Regulator has identified seven steps that employers should follow as they prepare for automatic enrolment.
1. Know your (your clients’) staging date
2. Assess the workforce
3. Review existing pension arrangements
4. Communicate the changes to all workers
5. Automatically enrol ‘eligible jobholders’
6. Register with The Pensions Regulator and keep records
7. Contribute to workers’ pensions
Once an employer knows when their staging date is, and has established what their duties are towards each member of their workforce the next step is to ensure that an appropriate pension scheme is in place.
For many large employers this will mean deciding whether they wish to use their existing pension scheme for automatic enrolment. For many smaller employers it will mean choosing a pension scheme for the first time.
Whether an employer uses their existing scheme or a new scheme, they will need to make sure that the scheme meets certain minimum criteria, which are set out in legislation. The scheme must:
· be an occupational or personal pension scheme
· be tax registered, and
· satisfy certain minimum requirements in relation to the individual jobholder.
The ‘minimum requirements’ mentioned above differ depending whether a scheme is defined benefit (DB) or defined contribution (DC). However they generally relate to contribution or benefit levels. An employer offering a DB scheme will be required to offer a minimum level of employee benefit, whilst an employer offering a DC scheme will be required to pay a minimum level of contributions into the scheme.
Before an employer can automatically enrol individuals into a scheme it must also meet some additional criteria, including that it must not contain any barriers to enrolment, members must not be required to make any choices in order to join or remain in the scheme, or be required to provide information in order to remain in the scheme.
It is important that employers factor time into their preparations to assess the scheme they are looking to use and ensure that it meets the minimum criteria.
Employers who have an existing DC scheme can use our simple online tool to help them assess whether it already meets the qualifying criteria www.tpr.gov.uk/employers/does-your-existing-scheme-qualify
For more information about schemes that can be used for automatic enrolment see our detailed guide number 4 ‘Pension schemes’ www.thepensionsregulator.gov.uk/employers/detailed-guidance
Delivering good member outcomes
The criteria set out above are an important foundation, however there are other things to consider before an employer makes a decision about what type of pension scheme to use. A leaflet on our website sets out some questions that employers should ask of providers and advisers when reviewing existing pension arrangements to make sure that they are fit for purpose, or when selecting a new scheme for automatic enrolment. This has been designed specifically for large employers who will be the first to face these decisions. We are also working with the pensions industry to ensure that all schemes offered as vehicles for automatic enrolment are designed and run in such a way that they enable all members to achieve a good outcome from their savings.
For more information about the new employer duties visit www.tpr.gov.uk/automatic-enrolment
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