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The Pensions Regulator – Collective Defined Contribution pension scheme legislation expected in August 2022 20 December 2021 The Department for Work and Pensions (DWP) is working to legislate for Collective Defined Contribution (CDC) pension schemes, currently picking up traction in other nations. This will pave the way for Royal Mail and the Communications Workers Union to introduce the CDC pension scheme they have been working to bring to employees since 2018. The Pension Schemes Act 2021 introduced the framework to allow CDC pensions schemes to be administered and Minister for Pensions, Guy Opperman, hopes “ Millions of pension savers will benefit from CDCs in the years to come .” CDC schemes operate where all members contribute to the same pot, a Collective Money Purchase (CMP) scheme. Where these schemes differ from annuities and defined benefit schemes is that retirement income is estimated, rather than promised. This can vary depending on fund performance and needs to be effectively communicated to members, however, one of the benefits of CDC schemes is their resilience to market fluctuations. In the Occupational Pension Schemes (Collective Money Purchase Schemes) Regulations 2021 consultation response, the DWP indicates that the legislation will come into force on 1 August 2022, subject to parliamentary approval. Other legislation required for “necessary consequential and miscellaneous changes” will be made in February 2022. The ongoing supervision of CDC schemes will be conducted by The Pension Regulator, which is expected to consult on its guidance and code of practice in January 2022.
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Could auto-enrolment be extended to 18-year-olds? 6 January 2022
Conservative Member of Parliament (MP), Richard Holden, has tabled a motion in the House of Commons to extend auto-enrolment to those who are aged 18 and above, and those who are lower earners. Currently, auto-enrolment only applies to those who are receiving over £10,000 per year and who are 22 and above.
This will not only increase the pension savings of those aged 18 and above, but also potentially those who work part- time, who earn under the current threshold.
A review into auto-enrolment took place in 2017, and one of the recommendations made centred on the lowering of the minimum age at which auto-enrolment should apply.
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Pensions (Extension of Automatic Enrolment) Bill will not seek to remove the earnings trigger 25 February 2022 The private members bill, initially read on 5 January 2022, is due for its second reading on 25 February 2022. Details of the bill reveal that the rumoured plans to scrap the earnings threshold are not included. The plans aim to increase the proportion of the population saving into pension schemes for retirement. With the automatic enrolment age being lowered to allow young savers more time to take advantage of compound interest. Lowering, or removing, the earnings trigger would also bring lower earners into workplace pension schemes. This follows Opperman’s previous statement detailing the governments intent to keep the earnings trigger and qualifying earnings bands the same for 2022/23 tax year.
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