Payroll: pensions hot spots

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Robert Lovell
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Senior policy liaison officer for the Chartered Institute of Payroll Professionals (CIPP), Diana Bruce, discusses some of the latest hot topics in payroll and pensions, starting with automatic enrolment.

In line with the introduction of automatic enrolment in 2012 come a host of ‘knock on’ regulatory reviews. 

The Department for Work and Pensions (DWP) has published a call for evidence which seeks views to assist the review of the regulatory differences between occupational and workplace personal pension schemes.

This is to ensure that the legislative framework governing pensions remains appropriate in light of the automatic enrolment changes. In particular, the DWP want to make sure that the separate rules and regulations governing workplace personal pensions and occupational pension schemes are consistent with the aims of automatic enrolment. They do not want to see instances of regulatory differences being exploited or adding unnecessary burdens on business. In particular they are interested in views and evidence concerning the use of short service refunds and disclosure of information. There is still time to submit evidence as the call for evidence does not close until 18 April.

The government will respond to the call for evidence in the autumn, outlining the actions they intend to take in response to the evidence presented.

Loophole to exploit DC regulations

A specific area that is liable to cause issues is that existing rules allow workers with trust-based schemes who leave employment within two years to have their contributions refunded. The employer can then leave its contributions in the trust to offset against administration costs or future contributions.

There is a risk that some firms may sign up for trust-based schemes rather than contract-based schemes to take advantage of the regulatory arbitrage. The DWP is to take action to stop firms using differences between defined contribution regulations to cut scheme costs when faced with auto-enrolment. 

We have yet to hear what solutions are going to be proposed!

Default Retirement Age (DRA)

Due to the abolishment of the DRA, the government has published the

draft regulations

for the repeal of the DRA which includes an unusual change in the transitional arrangements.

It was announced previously that the DRA is being phased out over a six month period; however the draft regulations state that it is a 12 month period.

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