John Adams: Pensions landscape will be changing in 2022

In what may bring a sigh of relief, 2022 is not a year with new legal requirements incumbent on employers regarding pensions. But there are many ongoing requirements to be mindful of, and changes within the pensions environment that could lead to future impacts.

There is going to need to be ongoing engagement with automatic enrolment (AE). The new financial year in April will bring in changes to rates that could impact pension provision.

These include automatic enrolment trigger and salary thresholds and increases to the national minimum wage and national living wage increases, all of which could employee eligibility for AE and the contributions payable.

There will be a need to be maintaining ongoing AE duties. This will include paying the contributions legally required of the employer, monitoring staff eligibility for the pension scheme by age and earnings, managing requests from employees on joining or leaving the scheme, triannual re-enrolment, and keeping records to show that all of these requirements have been met.

More generally, the pensions environment is evolving and is very active currently, which may affect employers, both this year or in the future.

Then there is the issue of tax relief for low earners. In the autumn 2021 Budget, the government announced that it is bringing in an adjustment to the tax relief system from 2025 so that non-taxpayers (earning below the personal allowance) will have a 25% boost to their contribution regardless of whether they are in net-pay or relief-at-source schemes.

Environmental, social and governance (ESG) will be a further area of focus. ESG is increasingly being used within pension fund management to distinguish funds and give member choices.

This may lead to pressures to select a pension scheme and investment strategy aligned with employee expectations and corporate values.

Finally, another issue for 2022 is likely to be collective defined contribution (CDC). The necessary legislation has now been passed to permit CDC schemes. We are likely to see the first of these schemes from the Royal Mail in 2022 and others may follow.

Like almost every year 2022, is shaping up to be an interesting year in workplace pensions.

John Adams is senior policy analyst at the Pensions Policy Institute