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Occupational Pensions

Volume 508: debated on Monday 29 March 2010

To ask the Secretary of State for Work and Pensions whether the operation of her Department's rules on anti-enrolment into workforce pension schemes from October 2012 will entail any change to the net salaries of employees whose employers join the scheme. (324852)

From 2012 automatic enrolment into a workplace pension with a guaranteed employer and Government contribution will begin.

Jobholders who already receive workplace pension provision equal to or better than that required under the reforms are unlikely to see any change to their net pay.

The impact of automatic enrolment on net salaries for other jobholders will depend on the level of pension contributions payable into the workplace pension scheme used by the employer.

Once the workplace pension reforms have been fully introduced, overall contributions to qualifying defined contribution schemes must total at least 8 per cent. on a band of earnings. The 8 per cent. total will be made up from a minimum 3 per cent. from the employer, along with the jobholder’s own contribution and around 1 per cent. in tax relief. However, employers can choose to pay a greater proportion of the 8 per cent. total—resulting in a lesser impact on net pay.

The contribution rates for jobholders are being phased in over time. This will help jobholders to adjust gradually to the impact of the changes on their net pay. Jobholder contributions will be 1 per cent. from October 2012 to September 2016; 3 per cent. from October 2016 to September 2017 and 5 per cent. from 2017 onwards. All of these rates include normal tax relief.

Defined benefit schemes will be required to meet an overall quality test. The impact upon jobholders’ net salaries will depend upon the level of contributions required under scheme rules.