New pension measures announced to help employers

New measures designed to ease the administrative and financial burdens on employers running pension schemes have been announced by Pensions Minister, Rosie Winterton.

Following discussions with stakeholders, employers will now be able to 'self certify' that their pension scheme meets the quality standard based on the expected value of pension contributions to be made over the course of each coming year.

The Bill states the quality standard for a money purchase scheme is that members receive contributions of 8% of qualifying earnings, of which 3% are made from the employer.

She also confirmed that the rates for the General Levy and the PPF Administration Levy for 2009/10 would be frozen at this year's level to avoid putting additional cost pressures on pension schemes at the current time.

DWP Minister of State for Pensions, Rosie Winterton said: "The Government understands the pressures that employers are under at the present time and we are committed to helping them in whatever way we can. These reforms are based on a broad consensus among stakeholders. For our reforms to work it is vital that wherever we can we make them as simple and straightforward for employers to implement. This will be to their benefit and their employees.

"The amendments will mean that employers who are confident their workers will receive the new minimum level over the year can certify to this extent as opposed to doing so for each individual over each pay period.

"By freezing the General and Administration levies at this year's level I believe we are meeting the commitment we made last year to provide levy cost stability for pension schemes."

DWP Minister, Lord McKenzie of Luton said: "Over 2 million workers currently receive contributions at or above the minimum laid out in the current Bill. We want this to continue.

The administration of the quality test is important, and we certainly do not want the new arrangements to undermine existing good provision. The introduction of certification is specifically intended to reduce this risk."

Earlier this year, the Government amended the Pensions Bill at the Lords Report stage, to enable employers to carryout the quality test over a period of up to a year. It also confirmed the position that it is the value of contributions going into pension saving, not the method by which they are calculated, that determines whether a scheme meets the test.

Following necessary checks, employers who are confident their workers are on course to receive the new minimum level of pension saving will be able to certify that their arrangements meet the new quality standard. Once certified, employers will not be required to make retrospective reconciliation payments if contributions unexpectedly fall short, unless the detriment to an individual exceeds certain minimum levels. These levels will be set in such a way to protect individuals from significant, systematic or persistent detriment.

The rates for the General Levy and the PPF Administration Levy for 2009/10 will be frozen at this year's level. The General Levy meets the administration costs of the Pensions Regulator, the Pensions Ombudsman and the Pensions Advisory Service. The PPF Administration Levy meets the running costs of the PPF. This maintains the Government's intention, to provide levy cost stability for pension schemes.