Govt proposal to relax DB certification for auto-enrolment may be ‘unworkable’

THE DEPARTMENT FOR WORK AND PENSIONS’ proposal to allow defined benefit schemes to self-certify may be unworkable, industry figures warn, Professional Pensions reports.

The consultation proposes easing regulation around meeting minimum quality requirements for DB schemes and creating an easier process for employers who contractually enrol employees (PP Online, 26 March).

Barnett Waddingham associate Phil Duly said he cannot see how all DB or defined ambition schemes could be declared satisfactory for auto-enrolment.

He added: “A DB scheme can define benefits in any way with regards to pensionable pay, accrual rates and pensionable age.

“The DWP may come up with a revised and slightly weakened set of requirements, and that could be considered, but it still needs to be measured in some way.”

However, First Actuarial director Henry Tapper said the consultation was an invitation to the industry to be more ambitious on improvements (PP Online, 2 April).

He said: “The DWP is asking whether all that is needed for a DB or DA scheme to be deemed a qualifying workplace scheme is for an actuary to certify it is worth at least 8%.”

The consultation also asked whether companies that contractually enrol need to comply with auto-enrolment.

Some have already staged, such as Tesco and RBS which both contractually enrolled employees into well-established schemes.

Tesco corporate pensions manager Karen Wake told the Pensions Management Institute Spring Conference that not having a quality test for pre-existing auto-enrolment type systems was difficult.

She called for “a quality test as an alternative to the prescriptive auto-enrolment process”, which she said would be useful as “employers who broadly meet criteria and contractually enrol don’t have to auto-enrol as well”.

Allen & Overy pensions lawyer Helen Powell added the consultation is a proposal to move to principles-based regulation, but was concerned over possible extra employer requirements.

She said: “These employers are already going the extra mile and including lower paid or younger employees and chose contractual enrolment over the intricate auto-enrolment process.

“To impose additional requirements on them, after they got to the same destination by a better route, is quite frustrating.

“While we welcome them not having to do auto-enrolment as well as contractual enrolment, we wouldn’t want to see additional requirements or certification processes or other checks and balances.”