Last week moneymarketing.co.uk revealed that at a meeting between the CBI, the Association of British Insurers, the National Asso- ciation of Pension Funds and the Department for Work and Pensions, the Government finally rejected industry proposals to allow a dual earnings’ model using total band earnings and basic earnings.
Current Government plans mean employers will have to prove on an annual basis that contributions are at least 8 per cent of total band earnings.
Industry groups warn this will lead to levelling down and damage existing provision and propose allowing employers to continue to use basic earnings and for the test to be performed every three years.
Standard Life head of pensions policy John Lawson says: “This Government seems hell-bent on damaging existing provision. They have been stringing the industry along all summer and then pulled the rug out at the last minute.”
A DWP spokesman says that the Government has not shut the door on discussions but that “some of the alternatives suggested to us thus far would undermine employees’ minimum level of pension saving”.
He says: “There is no reason for employers to make any changes as long as their existing arrangements result in contributions of at least equal value to those required by the Pensions Bill.”
But Lawson argues that only allowing total band earnings will lead to extra administration for employers, with many changing their schemes’ earning definition to mimic personal accounts.
However, he points out that changing employer contracts is fraught with emp- loyee relations issues.
Lawson says: “It is easier for an employer to say to all employees: ‘The Government has brought in this new scheme which I have to put to you by law. The current scheme does not qualify, so we are closing it and putt- ing all members into the Government scheme’.”