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Self-cert brings smiles for once

It has been a long time since the term self-certification has been used in a positive headline as anyone in the mortgage industry will attest.

The latest news from the Government, that it is willing to allow employers to self-certify that their existing pension schemes that meet the exemption test for personal accounts, has brought some cheer to the industry although the devil will be in the detail as always.

The Government has at least shown that it is ready to listen to stakeholders who have a lot more experience of the sector and the issues at play than its newly-appointed pension minister who has barely got her feet under the table since October¹s Cabinet reshuffle.

Money Marketing¹s Time to Get Personal campaign has been pushing for the Government to ease the bureaucratic burden on employers who have good existing pension schemes in order to prevent mass levelling down when personal accounts are introduced in 2012.

The Department for Work and Pensions has said that under an amendment it has tabled to the Pensions Bill – currently making its way through the Lords – employers will be able to self-certify that their schemes meet the necessary quality standard based on the expected value of contributions over each coming year.

The Bill states that in order for an employers¹ money purchase scheme to qualify members must receive contributions of 8 per cent of their qualifying earnings – of which 3 per cent are made by the employer.

Under the amendment employers will be able to self-certify if they are confident that their members will receive the minimum level over the year rather than having to show this for every individual employee over each pay period.

The detail that is still proving to be a sticking point between the Government and the industry is the definition of qualifying earnings.

In the Bill, this is still described as including basic pay, overtime, bonus and commission, but Hargreaves Lansdown head of pensions research Tom McPhail says that many employers use basic pay in calculating contributions to their schemes and so it will be difficult for them to change the basis of their calculations to make sure their contributions meet qualifying standards.

Aegon Scottish Equitable head of pensions development Rachel Vahey says it is encouraging to see the Government engaging with stakeholders and that it is a step in the right direction, but she is also concerned about the definition of qualifying earnings.

She says: “It is crucial that we do not push employers with good existing schemes into dropping these in favour of personal accounts – which could mean that some employees end up losing out.”


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