Scottish Life warns new AE option will add complication
The Department for Works and Pensions has amended its auto-enrolment regulation by introducing a fourth self-certification option, in a move pensions provider Scottish Life has labelled “unexpected” and which it says could add further complication for advisers and clients.
Certification is one way that employers can demonstrate that they and their workers are paying enough into an automatic enrolment scheme.
The three options that had previously been discussed are: 9 per cent of basic pay; 8 per cent of basic pay, provided basic pay is at least 85 per cent of total pay; and 7 per cent of total pay. These are collectively known as the ‘alternative quality requirements’.
However, Scottish Life business development manager Jamie Clark said that a new consultation paper has introduced a fourth certification option has crept in, called the ‘relevant quality requirement’.
This option is backed up by recently updated guidance from the Pensions Regulator and means that employers can certify that they are paying enough into their automatic enrolment scheme as long as a total of 8 per cent of ‘qualifying earnings’ is being paid in and the employer is paying at least 3 per cent of ‘qualifying earnings’.
Mr Clark said in a blog post that the introduction of a fourth self-certification option was “unexpected” - he added that it has “blown his mind” - and that it would make the rules “even more complicated” for advisers and clients.
He said: “It’s this regulation that I had to read over and over again before I finally realised it’s something new and totally unexpected. We always thought there were three certification options, now it seems there are four.”
However, Mr Clark remains unsure as to what this option means, labelling it as “a bit odd” that at this late stage there is another certification option that appears to add complexity to the automatic enrolment rules and processes.
Mr Clark said: “It’s not entirely clear, for example, whether certification on the ‘relevant quality requirement’ basis can be used for new schemes.”