Certification is intended to allow employers with percentage of basic pay pension schemes to certify at the start of each year that they thought that all their employees would have had at least the legal minimum.
Standard says the tolerance levels suggested, 5 per cent of the expected contribution, means that if the employee gets less than 7.6 per cent, i.e. 95 per cent of 8 per cent of band earnings, they have failed the test and must be topped up to 8 per cent. Additionally, if more than 10 per cent of workers in any scheme fail the test, the contributions for all employees must be increased to 8 per cent retrospectively. Finally, no employee is allowed to get less than 8 per cent of band earnings two years running.
John Lawson, head of pensions policy at Standard Life says: “The amount of red-tape that employers will have to go through makes certification unworkable. Employers with schemes currently around 8 or 9 per cent of basic pay will switch to band earnings, so that they can be sure that enough is being paid in. However, the big losers in this shift to band earnings will be low earners who will have the first £5,000 of their earnings disregarded. Unless they also earn £5000 in overtime, bonus or commission, their overall pension contributions will be lower.”
Standard attacks DWP over too tight certification rules
