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Pensions

Overview
Gallagher, David - Fieldfisher LLP
Overview
There are three main types of pension arrangements for employers: group personal pension schemes, occupational pension schemes and stakeholder pension schemes. These arrangements provide two main types of pension benefit: defined benefits and money purchase benefits. These benefits are provided either as part of a trust based arrangement or through contract.
 
A pension is a tax efficient form of remuneration for both the employer and employee. However, the regulations surrounding pensions are complex and laid down by various regulatory bodies, including HMRC, the Department for Work and Pensions and the Financial Conduct Authority.

Automatic enrolment obligations were introduced for different employers at different times. The largest employers were subject to these obligations first and the smallest employers and new employers were subject to these obligations last.

The Pensions (Extension of Automatic Enrolment) Act 2023 received Royal Assent in September 2023. This lowers the age at which eligible workers must be automatically enrolled into a pension scheme by their employers, from 22 to 18. The Department of Work and Pensions (DWP) will launch a consultation on implementing the new measures.

Until the results of the consultation period are available, it is unclear how this will be implemented in practice. It is not likely to come into force until at least September 2024

Key points 

  • Employers must enrol workers in a pension scheme and contribute to it.
  • The employer must include a statement regarding access to a pension scheme in the employment contract. 
  • If an employer with at least 50 employees makes certain changes to its pension arrangement it may be required to undergo a minimum period of consultation.
  • The employer must monitor and record pension contributions. All contributions must be paid by the legal due date.
  • The engagement terms of pension advisors should be documented. 
  • An organisation should offer employees general information about the pension but not advice.
  • Employers should carefully draft any announcement that details employer pension contributions, and reserve the right to change the terms on which contributions are made.

Recent developments

Pensions law receives Royal Assent

The Pensions (Extension of Automatic Enrolment) Act 2023 received Royal Assent in September 2023. This lowers the age at which eligible workers must be automatically enrolled into a pension scheme by their employers, from 22 to 18. The Department of Work and Pensions (DWP) will launch a consultation on implementing the new measures.

Until the results of the consultation period are available, it is unclear how this will be implemented in practice. It is not likely to come into force until at least September 2024.