Pensions minister Rosie Winterton said recently that employers would be allowed to self-certify that their pension schemes meet the minimum contribution – 8 per cent of banded earnings – required to exempt them from personal accounts.
The move was welcomed by some in the industry as a way of helping to stop good-quality company pension schemes from levelling down due to the admin burden involved in proving that contributions meet requirements.
But Lawson says the fact that most employers base contributions on basic earnings rather than banded earnings means self-certification will not work. He says: “Employers will have to certify that all their employees pass the contribution test but very few will be able to do that because most employers base their contributions on basic earnings rather than banded earnings.
“Employees only need to have 16 per cent of their total pay made up of overtime, bonuses or commission for the company to fail the contributions test.”