Pensions Regulation in UK

As the year 2011 draws to a close, we are entering into a new year that is very important for UK workplace pensions. The new regulation around workplace pensions is coming into force in 2012.

Being purely technical for few years, I just want to test my skills around understanding regulatory documents and extract "Functional Information Needs" for a business.

A good review published in October 2010 can be accessed here: http://www.dwp.gov.uk/docs/cp-oct10-full-document.pdf


Basically, all the employers in UK have to automatically enroll all the eligible workers falling in a AGE range and EARNINGS range to a suitable pension scheme. They also need to "certify" the selected pension scheme meets the required quality criteria. (Refer to section 6.5 of the review document above) The requirement is to have at least 8% of earnings are paid towards a pension fund.

Regulation defines "Qualifying Earnings" as gross earnings that include commissions, bonuses, overtime etc., but most of the employers have the pension contribution basis as the "Basic Pay" i.e a pensionable pay. So, employer has primarily following options to "Certify" the pension scheme and comply with it.

Pseudo logic in plain English
1. IF pension contribution basis IS qualifying earnings (within the band) THEN pay the contributions of 8% and no certification is required.
2. IF pension contribution basis IS pensionable pay THEN
2a. CASE pensionable pay is 100% of gross pay THEN pay contributions of 7%
2b. CASE pensionable pay is at least 85% of gross pay THEN pay contributions of 8%
2c. CASE pensionable pay is less than 85% of gross pay THEN pay contributions of 9%
AND self certify pension scheme for all the employees participating in the pension scheme.

So, core information needs to implement this regulation is employee payroll data that covers age, all components of qualifying earnings of all employees. A bit of intelligence is needed to "model" the best possible grouping of employees and assign them to a suitable pension scheme(s) with one (or more) of the pension providers in the market.

The overall goal for a techno-functional consultant like me is to optimize the value of new pension regulations for employees, employers, pension providers and IT consulting companies by optimizing the information flows across various stakeholders!!

Wishing everyone a great new year 2012. Let there be peace, security and prosperity be with one and all.