21 January 2010 - Post by:Helen Powell
The Government has been very busy in the last couple of weeks providing lots more information about the mechanics of auto-enrolment and about duties and options for employers.
Among the announcements was the news that personal accounts, the national money purchase arrangement which is an alternative auto-enrolment option for employers, has been rebranded as NEST – the National Employment Savings Trust. It’s usually pretty easy to take potshots at rebranding initiatives, but since this £363,000 project has resulted in the word ‘nest’ inside an egg (surely the other way round is more normal?) it’s hard to pass up the opportunity*
The new name has caused an outbreak of appalling puns and dodgy metaphors in the media, though the Government seems blissfully unaware of what it has unleashed. Angela Eagle MP, speaking at the NEST launch, even referred to herself as “an Eagle with an eyrie rather than a nest”, leaving us with a rather unfortunate mental image of a bird of prey guarding its own larger-than-average nest egg.
Putting the comedic possibilities of recent announcements to one side, it’s disappointing that key aspects of the regime remain unclear. Our clients want to assess their position now so that they can plan strategically for 2012 and later, but the Government has withdrawn key parts of the regulations which would have enabled employers to test themselves against the quality standards required for auto-enrolment.
Even in high quality schemes, the way that earnings are assessed under the auto-enrolment legislation can throw up unexpected problems. If you’re testing your scheme against a contribution standard based on total earnings including overtime, bonuses and so on, but your scheme pensionable pay definition is based on basic pay only, then whether you pass the test or not may vary for different individuals or in different periods. The Government had proposed useful tolerance thresholds and sampling mechanisms to cater for this, but these have now disappeared pending further consultation, leaving the industry in the dark. This is an unfortunate outcome for a consultation which was deliberately kept short in order to provide early certainty for employers.
There are more positive aspects to the latest proposals, though: notably the fact that the Government has retreated from its view that short-term workers should always be admitted to scheme membership from day one of their contract. Now an employer offering a high quality scheme will be allowed to postpone automatic enrolment for three months where certain conditions are met. That means that probationary employment periods are covered and that one-off short-term workers needn’t be enrolled into the scheme – so less administration and lower costs. Other registration and record-keeping requirements have also been reduced, and the full minimum contribution rate won’t kick in until October 2017, a year later than first thought.
At the moment then, the choice seems to be between the Eagle’s Nest and a curate’s egg (good in parts)**. Watch this space…
*To add to the linguistic confusion, the PADA website now invites you to read about NEST in a nutshell.
**Apologies – if you can’t beat them, join them…
Helen Powell is a senior professional support lawyer at Allen & Overy LLP.