Legal & General pensions strategy director Adrian Boulding has warned the Government’s determination to pin down a definition of pensionable pay for automatic enrolment self-certification risks undermining the reforms as employers will scale back provision.
In May, Money Marketing revealed that last-minute changes to auto-enrolment self-certification rules would encourage employers to cut back on quality pension provision.
Policymakers proposed an amendment to the draft regulations so that the tests used by employers to self-certify their pension scheme are based on basic rather than pensionable earnings.
Boulding was part of the independent three-man team appointed by the Department for Work and Pensions to review the Turner Commission’s original automatic enrolment recommendations, including simplification of the self-certification process.
He says: “There is an ongoing debate within the DWP on how to define pensionable pay but the definition should be kept as broad as possible because good schemes have lots of different definitions. If the Government wants to pin down a specific definition, it is unlikely to correlate with many existing pension schemes, so good sch-emes will have to make changes.
“If an employer is changing a good scheme in the current economic circumstances, there is only one way they are going to change it, they will make it worse. If the DWP pushes this change through, it will be coun-ter to what the review team was trying to do and it would be a tragedy for part-time and lowpaid staff.”
Syndaxi Chartered Financial Planners managing director Robert Reid says: “The big risk with this is that companies will level down. But the idea that DWP lawyers would accept a non-specific term such as pensionable earnings is laughable.”