UK - The Department for Work and Pensions (DWP) has launched a consultation on proposed changes to UK law allowing career-average revalued earnings (CARE) schemes to be subject to the incoming auto-enrolment reform.

In the consultation document, the department noted that wording in the Occupational and Personal Pension Schemes (Automatic Enrolment) Regulations 2010 interacted in an unintended way with various CARE scheme regulations, ruling them out as qualifying schemes.

Under current legislation, CARE schemes that offered a combination of guaranteed benefit revaluation below the minimum rate of either the consumer prices index or 2.5% and a discretionary revaluation in line with the scheme's funding principles were deemed ineligible.

The DWP said: "Subject to the findings of the consultation and the parliamentary timetable, the government is proposing to amend the regulations as quickly as possible and before the onset of the employer duties for those organisations that are likely to be affected."

It stressed that it was not proposing to amend or revisit aspects of auto-enrolment guidelines specifying what was deemed a qualifying scheme and that defined benefit CARE arrangements were always intended to be eligible.

"We propose to set out the minimum required outcome and to provide appropriate flexibility for schemes and employers providing CARE schemes so that these can be used for the purposes of automatic enrolment," the consultation said.

Responses should be submitted by 11 June.

Meanwhile, a survey by Aviva has predicted "significant" opt-out rates as auto-enrolment is introduced, with a new survey finding that employers expected up to a third of their workforce to resist soft compulsion.

The insurance company's Working Lives report found that 68% of employees were unaware of the imminent reforms, with 37% saying they would consider leaving a scheme once auto-enrolled - the figure similar to the 33% opt out rate expected by companies.

Graham Boffet, managing director of Aviva's corporate benefits division, acknowledged the challenge posed by reforms launching at a time of economic "uncertainty".

"When the first companies start to automatically enrol their employees in October this year, we can't expect an immediate step-change in how people save for their retirement - employers and the industry will need to make a long-term commitment to ensuring it's a success," he added.

The survey also shed some light on levels of contributions.

While 43% of employees currently not enrolled in a scheme would contribute once prompted, only 8% would exceed minimum contribution levels.

Topics