Will an employer with an occupation pension scheme but no employee contributions avoid AE?

[Racrus]

I'm confused with some of the scenarios where Auto-Enrolment will be implemented or not implemented. In the scenario where a place of employment has an occupational or company pension in place but without employer contributions. If employee Sean is contributing to this pension, and therefore has a pension (so will not qualify for AE I believe) but no employer contributions, will this employee not get the employer and the state contributions that he would get under the AE scheme.

Does this not mean that employers that want to escape from having to pay mandatory AE pension contributions, all they have to do is set up some occupational pension scheme now before AE comes into law and and try and get employees to pay into that themselves so that said employees then won't qualify for the AE pension scheme.

Or will employers have to pay the government AE mandatory employee contributions into the occupational pension scheme?

Is there going to be a scenario where a low paid employee that has an existing small personal pension but with no employer contributions will just remain as they are? ie: this employee will still not receive employer or the government state contributions?

Could someone point out the flaws in my thinking or am I correct on this?

 

[Fortune]

Isn't there a vague line in the legislation or pensions manual that says employers must make a meaningful contribution to the pension scheme?

 

[Duke of Marmalade]

Employees who are existing and actively contributing members of a pension scheme/contract which meets prescribed minimum standards and contribution levels will not be automatically enrolled for the employment to which that pension scheme relates.

So there will be a concept of meeting minimum standards to let an existing scheme absolve employers from needing to implement AE. I myself was in my day a member of a good non-contributory DB scheme, hard to believe that I would have been forced to join an AE DC scheme. Then we have the situation that nearly all occupational schemes have a "probationary" period of say 6 months before being enrolled. Will those schemes qualify?

 

[Racrus]

Sorry for my thickness but I'm still unclear, I could do with having this spelled out clearly. Are you saying that employers with an occupational pension in place but in which the employer doesn't currently contribute will now have to compulsory enlist employees that aren't participating in it and have no other pension and make the same contribution to it that they would have had to pay to the AE scheme. And the government will contribute to this company occupational pension too?

 

[Duke of Marmalade]

Sorry for my thickness but I'm still unclear, I could do with having this spelled out clearly. Are you saying that employers with an occupational pension in place but in which the employer doesn't currently contribute will now have to compulsory enlist employees that aren't participating in it and have no other pension and make the same contribution to it that they would have had to pay to the AE scheme. And the government will contribute to this company occupational pension too?

Join the club - we are all unclear. The details of this have all been put on the long finger and believe me there will be devil in those parts. All we know is that there will be a concept that if the employer has an alternative occupational pension scheme (OPS) that "meets certain minimum standards", yet to be specified, then it will not need to join auto-enrolment (AE). But one presumes that means that the OPS would have to at least incorporate the key features of AE. Very basically it would seem that employees would need to be "auto enrolled" in the OPS from day one, something which is not the conventional practice. As to the "government contributing" it is assumed that for an OPS that will continue in the alternative form of tax relief as is currently the case rather than a 1 for 3 top-up. That will leave standard rate taxpayers in an OPS worse off than in AE as standard rate tax relief is equivalent to a 1 for 4 top-up. If employees are outside the tax net of course tax relief is useless. On the other hand, for higher rate tax payers tax relief at 40% is worth twice the 1 for 3 top-up. If this state of affairs persists employers will have no choice but to run parallel schemes - OPS for 40% taxpayers and AE otherwise and arrange for migration between the two. Don't worry, the Minister assures us it will all be up and running this year.

 

[Racrus]

Join the club - we are all unclear. The details of this have all been put on the long finger and believe me there will be devil in those parts. All we know is that there will be a concept that if the employer has an alternative occupational pension scheme (OPS) that "meets certain minimum standards", yet to be specified, then it will not need to join auto-enrolment (AE). But one presumes that means that the OPS would have to at least incorporate the key features of AE. Very basically it would seem that employees would need to be "auto enrolled" in the OPS from day one, something which is not the conventional practice. As to the "government contributing" it is assumed that for an OPS that will continue in the alternative form of tax relief as is currently the case rather than a 1 for 3 top-up. That will leave standard rate taxpayers in an OPS worse off than in AE as standard rate tax relief is equivalent to a 1 for 4 top-up. If employees are outside the tax net of course tax relief is useless. On the other hand, for higher rate tax payers tax relief at 40% is worth twice the 1 for 3 top-up. If this state of affairs persists employers will have no choice but to run parallel schemes - OPS for 40% taxpayers and AE otherwise and arrange for migration between the two. Don't worry, the Minister assures us it will all be up and running this year.

That has clarified the situation greatly for me, Thanks for taking the time.