This article is the second step in our 5 step guide to auto-enrolment outlining what you need to do as an employer.
A qualifying scheme is a pension which meets both the qualifying criteria and minimum requirements set out by The Pensions Regulator.
Qualifying schemes may either be defined benefit or defined contribution (money purchase) schemes. Practically, unless you have an existing final salary scheme (defined benefit) in place it is more likely you would establish a defined contribution pension scheme to meet your auto-enrolment obligations.
If you have an existing workplace pension scheme you can use this, if it qualifies, or it could possibly be amended so it qualifies. If you set up a new defined contribution pension scheme it can be either an occupational or personal pension, as long as it meets the qualifying criteria.
The Pensions Regulator’s minimum requirements differ according to the type of pension scheme.
As well as a minimum contribution rate, if you are using a Group Personal Pension Plan as your qualifying scheme it must:
- Be subject to regulation by the Financial Conduct Authority and have its operations carried out in the UK under section 19 of the Financial Services and Markets Act 2000
- Provide money purchase benefits
- Have certain types of agreements in place between the employer, the jobholder and the provider of the scheme
- Be certified
There are also new governance requirements applying to defined contribution workplace pension schemes.
You must ensure your pension scheme complies with the 'charge cap' and a does not have an 'active member discount'.
Additionally, you should consider the appropriateness of the scheme and whether it delivers good member outcomes.
To find out if your existing or newly chosen scheme is qualifying, The Pensions Regulator has published a guidance document, which can be viewed here.
Keep an eye out for the next article in the series Step 3: you must make pension contributions.