What's New in GPT

GPT Online
Good news to report! GPT Online has been completely refurbished with increased content and greater functionality. Here are some of the new items you’ll find:

If you’ve forgotten your website login details, please don’t hesitate to contact us at enquiries@gpt-online.com.

And now to some of the content of this Update…

Auto-enrolment and NEST
Effective 6 April 2012 employers become responsible (under a staged programme based upon number of employees) for automatically enrolling qualifying jobholders into the National Employment Savings Trust (NEST). The draft legislation is becoming clearer and a new section [1.28] has been constructed to consolidate the detail:

(i) where an employer runs more than one PAYE scheme, the scheme covering the most employees (including any pensioners on the payroll) will determine the start date for all the employer’s employees and for the employer PAYE reference [see 1.28.4]

(ii) an ‘eligible worker’s’ auto-enrolment date [see 1.28.1] will be either the date he/she started employment or the date of becoming eligible to be enrolled [see 1.28.3 (Note) and 1.28.1 (Note) (b)(i)]. The enrolment process needs to be completed automatically within one month of the jobholder becoming eligible, without any requirement to complete an application form in order to participate. Note: automatic enrolment is not applicable if the jobholder is already an active member of a qualifying scheme on that date [see 1.28.10]

(iii) there is to be

(a) an optional waiting period of up to three months before the automatic enrolment duty commences,
(b) opportunity for employers to certify that their existing pension scheme will meet a specified requirement based on earnings from ‘pound one’, rather than a requirement based on ‘qualifying earnings’ plus
(c) a new ‘earnings trigger’ for automatic enrolment and re-enrolment providing employers with greater flexibility over re-enrolment date for their employees (enabling it to be up to three months before or after the third anniversary of the staging date or last re-enrolment date)

(iv) all employers will be able to bring forward their automatic enrolment date to an alternative specified date, as early as October 2012. This is known as ‘early automatic enrolment’. Its use is conditional on the employer having

(a) access to a pension scheme which it considers could be used to comply with its duties,
(b) the scheme’s agreement that it can be used to discharge those duties from that early auto-enrolment date and
(c) notified The Pensions Regulator in writing of its intention to bring forward its duty date, at least one month before the proposed new date.

Investment Committee of NEST – main types of investment risk faced
Section 18.4.11 contains extracts from the Statement of Investment Principles (SIP) published by the Investment Committee of NEST. Among the items mentioned in NEST’s SIP is its intention to sign up to (a) the UN Principles of Responsible Investment (UN PRI) – a set of six best practice principles on responsible investment (www.unpri.org) and (b) the Financial Reporting Council (FRC) Stewardship Code (www.frc.org.uk). NEST sees the latter as ‘the UK standard for good stewardship; a minimum requirement and a stepping stone to improving stewardship in the UK’.

Guidance on Default Investment Options for auto-enrolment
In a similar vein, the DWP has issued guidance for offering a default investment option for Defined Contribution automatic enrolment pension schemes. [See 18.9.7 (Note)]

Abolition of Protected Rights from 6 April 2012
To recap: effective 6 April 2012, the legislation supporting contracting-out on a money purchase basis will become redundant (except where it needs to be retained for a transitional period [see 1.9.2]) and all benefits classed as Protected Rights will cease to exist from that date [see 1.8.1]. All contracting-out certificates held by DC schemes will be cancelled automatically by HMRC, effective 6 April 2012, including certificates issued in respect of the money purchase sections of Contracted-out Mixed Benefit (COMB) schemes [see 1.6.5]. Salary-related sections of existing COMB schemes will continue to contract out under their existing contracting-out certificate. However if, by 6 April 2012, a scheme contracted out on a DC basis changes to satisfy the Reference Scheme Test [see 1.9], it may switch to DB contracting out from 6 April 2012, without having to discharge liability for its earlier Protected Rights benefits [source: HMRC Countdown Bulletin 4]. That said, the scheme’s DC contracting-out certificate will nevertheless cease to be valid from 6 April 2012 and a new election to contract out on the DB basis will have been necessary. [See www.hmrc.gov.uk/forms/2007]

Proposed changes to Disclosure Regulations
The Government proposes to consolidate the existing main disclosure requirements in one new statutory instrument. Further, it intends to allow electronic communication for all communications between schemes and members. [See 11.1.11] ‘This would involve (i) a review of “the fit” of the Statutory Money Purchase Illustrations provisions with the new pension landscape post Auto-enrolment in 2012; and (ii) an extension to the provisions (introduced in December 2010) which allow schemes to communicate with members electronically.’

Role of Trustees in DC Schemes
In confirming the Regulator’s expectations of trustees of DC schemes, new section 1.11.26 includes extracts from The Pensions Regulator: Role of Trustees in DC Schemes under the following headings: (a) Risk management (b) Costs and charges (c) Investment (d) Asset protection (e) Administration and (f) Contributions.

Workplace pension schemes
New sections 1.11.27 and 1.27.5 outline what is meant by ‘workplace pension schemes’ and detail some of the risks involved.

Hybrid pension schemes
The Pensions Regulator has issued a statement Understanding and managing your hybrid scheme to help trustees and their advisers understand the risks that can arise in hybrid schemes and take action to mitigate them. The statement includes a series of checklists summarising the actions which trustees, administrators, employee benefits advisers and others should take to make sure they are able to properly manage their scheme. [1.19 confirms].

Identifying statutory employer(s)
Not all employers associated with a scheme will necessarily be statutory employers. It is important to be able to identify the type of legal obligation an employer owes to the scheme. The ‘statutory employer(s)’ to a scheme will be the employer(s) legally responsible for:

(i) meeting the scheme funding objective of the pension scheme
(ii) paying the section 75 debt when an employment cessation event occurs on employer departure from a multi-employer scheme, on scheme wind-up or on employer insolvency and
(iii) triggering entry to a Pension Protection Fund (PPF) assessment period on insolvency. Section 14.9.16 contains extracts from the Pension Regulator’s Statement: Identifying your Statutory Employer, July 2011.

Closing to new entrants – possible investment strategy
Outlined in 16.6.1 (Note) is a possible investment strategy to apply after a DB scheme closes to new entrants.

SUMMARY OF MAIN REVISIONS FROM THIS UPDATE

The Guide's regular Updates help keep it up to date with important and topical new items, but changes to pages can also include new technical terms, changes to organisations' names, new cross-references and a variety of minor revisions, as well as description of legislative, technical and other material, and useful tips or simply interesting additions. Here is a summary of the main changes made by this Update.