Another pension reform post I’m afraid, but an important one. A question that has been kicking-around since last October seems to now be answered, at least in part, by Lord Freud in the House of Lords debates of the 30th March 2011.

The question centres on ‘Certified Schemes’, which for the uninitiated are schemes of a certain quality which an employer can offer as an alternative to NEST. By doing so, the employer can then avoid also having to offer, and auto-enrol employees into, NEST. This has it’s attractions to many employers, as a principle tenet of company pension provision is that the scheme costs are offset against improved staff retention and lower recruitment costs. NEST, being one size fits all, does not offer the recruitment and retention return, so many employers are looking at a ‘Certified’ scheme alternative to get the best return for their pension spend.

However, when details of the proposed certification test were outlined last year, no mention was made (or at least not that I could see) of whether a certified scheme could phase in contributions on a similar basis to that being proposed for NEST. Whilst a bit of an anorak point, this is important, as an awful lot of employers are looking at a significant cost increase as a result of auto-enrolment and compulsory employer contributions, and a phasing in period will help spread the cost rather than face a cliff-edge in the auto-enrolment year.

It looks like I was not the only one that could not see reference to phasing, hence Lord Freud’s comments as follows:

‘To help employers plan for the reforms, I should like to put on record that employers using certification will be able to phase in their contributions gradually. That question has been of some concern to the industry and I am pleased to clear it up. I believe that employers using certification will welcome that easement to help with the administrative and contribution costs of increasing enrolment into their schemes. We recognise the advantage that such an approach would bring and so have already kicked off discussion on how we might operate phasing within the certification model. We propose to set out the detail in regulations and guidance. The plan is to consult on secondary legislation informally over the spring, with a more formal consultation after the Bill receives Royal Assent.’

So, unquestionably good news, although the down side is that we don’t have the actual detail of what the phasing points are, which is a little problematic for business planning!

I’m indebted to Helen Forrest at the DWP for pointing me in the right direction on this question.

As ever, will keep you posted as things develop here.

Best regards

Steve