'Certify schemes to cut the prospect of levelling down'
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Legal & General wants the Government to rubber-stamp existing corporate pension schemes to reduce the likelihood of employers cutting their pension contributions in line with Nest.
L&G pensions strategy director Adrian Boulding told delegates at the Personal Finance Society annual conference in Coventry last week that the Government is facing the prospect of employers levelling down their existing pension schemes to reduce employer contributions in line with the new regulations.
He argued the threat posed by levelling down supports the case for certification, where the Government rubber-stamps existing defined-contribution plans as satisfying the new requirements.
He said: “The Department for Work and Pensions has actually begun to understand that unless we have certification, a lot of employers are going to draw a line under their existing schemes and stop them and start again with a scheme that exactly matches the statutory minimum paying the 8 per cent combined contribution on those earning between £5,000 and £33,000.”
Boulding said although initial research showed employers do not intend to level down pension contributions, as auto-enrolment has got closer, employers are now seriously tempted to reduce pension provision.
He added: “Many employers have said if auto-enrolment is going to double the amount of people I have in the workforce in my pension scheme, then I need to halve the level of contributions I pay in order to make the pension budget go round. So it is a very real risk that we will have levelling down and certification is the big defence against this.”
Intelligent Pensions technical director David Trenner says: “The obvious thing for employers to do is match the auto enrolment requirements. That way, companies cannot get into trouble for not implementing their schemes in the right way.”
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