The Pensions Bill currently before Parliament (see earlier Aries report) has now reached the Committee stage in the Commons. The Government has been tabling more and more amendments, mainly relating to personal accounts: this article summarises the changes so far. Opposition parties have been even more assiduous in trying to improve the Bill, but their proposals have almost no chance of success unless the Government adopts one and turns it into an amendment of its own. Consequently we look here only at Government amendments.

On 17 January the Minister for Pensions Reform, Mike O'Brien, introduced a new Clause 8 and a substantial set of related amendments providing that a worker who does not have "qualifying earnings"* may require the employer to enrol him or her into an occupational pension scheme, or a personal pension scheme where there are applicable direct payment arrangements. However, the employer will not be required to make any contributions for that worker, nor accept a notice more than once a year.

* "qualifying earnings" are gross earnings between £5,035 and £33,540 (limits to be revalued on line with earnings increases) in a "pay reference period". The Bill provides no indication at the moment of when a pay reference period starts and ends; it could refer to a tax year, a scheme year, the last 12 months on a rolling basis, or indeed a period of more or less than 12 months. There are some serious difficulties here, we believe, stemming from the use of "pay reference period" in the Bill to determine not only eligibility for auto-enrolment, but also the obligatory contributions. We don't know yet how the contributions test is going to work: neither over what length of time, nor whether it is to be month-by-month or cumulative.

New Clause 12 provides that for money purchase schemes, contribution limits are to be phased in. In the first year, the total contributions will be 2% of qualifying earnings, half of that to come from the employer. In the second year it goes up to 5%, with the employer paying 2%. After this transitional period, the employer must pay at least 3% and the minimum total contribution, including tax relief on any worker contributions, must be 8%.

Under New Clause 13, defined benefit and hybrid schemes will be allowed to delay auto-enrolment of existing employees who have either opted out or not yet opted in until the start of the third year; new staff and those who are presently ineligible to join will have to be enrolled from Day 1, however.

There will be an exception, though. In debate, Mr O'Brien said that "good quality" schemes - ie in his terms, where the employer contributes at least 6% - will be permitted to operate a waiting period, probably three months, before auto-enrolment would otherwise be required on Day 1.

Money purchase schemes are to be allowed to reject minor amounts of contributions that it is not financially viable to accept, without affecting their ability to satisfy the quality requirement. Amendments to Clauses 18 and 24 provide for the amount that may be rejected to be prescribed in regulations.

Other amendments

An amendment to Clause 84 addresses an oversight whereby the existing amendments in the Bill to the PPF rules, to allow sharing of PPF compensation on divorce, failed to cover Scotland. As is often the case, a large number of consequential amendments to other Clauses are also required.

The most recent amendments follow the Government's cave-in on the FAS. On 7 February, Mr O'Brien tabled New Clause 20, which extends the 'qualifying member' definition in s.286 PA 2004 (which provides for financial assistance for members of certain pension schemes), so that all relevant members can be qualifying members regardless of whether their liabilities are likely to be met by their scheme.

Update 20 February

Mr O'Brien has tabled the following additional new clauses:

NC23: TPR to be able to appoint trustees where "reasonable" (replacing the word "necessary") and extended powers to appoint in order to protect members' interests.

NC24: during recruitment, employers may not attempt to ascertain whether the applicant is likely to opt for auto enrolment, i.e. no screening on grounds related to pension scheme membership.

NC25: provides TPR with the power to issue compliance notices to employers if it considers that they have contravened the prohibition in NC24. The notices will tell employers what they need to do to put right their contravention or prevent it re-occurring.

NC26: gives TPR power to issue penalty notices to employers if it considers that they have contravened the prohibition in NC24 or have failed to comply with a compliance notice under NC25. Penalties are subject to regulations and must not exceed £50,000.