Pension changes aimed at helping employers

7 November 2008

The government has announced new measures designed to reduce the administrative and cost burdens faced by employers that operate pension schemes.

Changes to the Pension Bill mean that 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 per cent of qualifying earnings, of which 3 per cent are made from the employer.

Announcing the simplified rules, Rosie Winterton, the Pensions Minister, 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.

Ms 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. For our reforms to work it is vital that, wherever we can, we make them as simple and straightforward for employers to implement.”

The Minister added: “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.”

Commenting on the changes, Neil Carberry, head of employment and pensions at the CBI, said: “The announcement by the government is a step in the right direction. If the qualifying test is too complex and bureaucratic, many firms currently offering better provision may be tempted to level down into personal accounts, with employees losing out.”

But he continued: “We hope that the government will consider further simplification measures to ensure this does not happen, as the current proposals are still too complex.”