Guernsey Secondary Pension Scheme

At Fairfield, we want to guide you through the implications and provide you with an understanding of your obligations as an employer under the Secondary Pensions (Alderney and Guernsey) Law,  2022.

The law introduces some new terminology which this document intends to explain.

Approbated Pension Scheme - requires employers to enrol designated employees into a qualifying scheme, which is referred to as approbated.

You will be required to offer your employees a suitable approbated pension scheme, or the employee can use their own pension plan, but this must fall under the Pension Scheme and Gratuity Rules 2021, which means in practical terms the Trustees of the employee's pension plan must be regulated fiduciaries that are licensed to undertake pensions business.

If you already have an Occupational Pension Scheme it must be approved under Section 150(2) of the Income Tax Law, to qualify as an approbated pension scheme, and again subject to the Pension Scheme and Gratuity Rules 2021.

Right to opt in

The law gives every designated employee the right to join an approbated pension scheme.

I currently provide a pension allowance

Some employers already pay their employee's gross allowances in their pay. This practice should be avoided as of July 2023. The simplest solution is that the employer pays directly into a scheme or the employee's approbated RATs. It is our understanding that the spirit of the law is to ensure that every employee contributes to a pension plan. As an employer, you are forbidden to incentivise in any way to have an employee opt out.

Deferred Enrollment

Typically this would be used to defer enrolment until a successful probationary period and must be supplied in notice in writing. If this is not done then enrolment would occur automatically from the start of the employment contract or the law coming into force.

The maximum deferment period is 3 months, which may prove adequate for certain probationary periods, but caution should be exercised if probation is extended beyond this period.

Duty to make returns

The law will require that the employer has a duty to make a return, which will require evidence that the law is being complied with. At the moment we do not know what the expected return is.

Provision of Information

The employer has the duty to provide the employee with the following information:-

• summary of the key features, benefits, and provisions,

• explanation of the employee's rights and responsibilities,

• explanation of the rights and responsibilities of the employer and the scheme administrator,

• rights to benefits and vesting rules,

• details of all charges or anticipated charges,

• details of any deductions, commissions, or other inducements or incentives, that may be received by the employer, administrator, or any other party such as financial advisers, lawyers, actuaries, etc., and

• details of the plans administrator's procedure for resolving complaints
  

Employees right to opt-out

This is governed by the contract of employment and where this contract is silent in terms of having the ability to opt out of the scheme the following applies.

• details of how that right can be exercised,

• details of the right to withdraw and the procedure to follow, and

• re-enrol the employee within 3 months of the 3rd anniversary of the opt-out.

The employer must retain this record for at least 7 years, ensuring that this burden of re-enrollment and the risks that it entails in respect of non-compliance, you may consider in the future amending the employment contracts to prohibit opting out. 

Who is a designated employee?

• an employee who is 16 or over, and not in full time education,

• not over pensionable age (currently 67),

• resident in the Bailiwick of Guernsey,

• earns in excess of the lower earnings limit (2023: £163.00 per week or £706.33 per month), and 

• an "employee" is an individual who has entered into or who works under a contract of employment.

Duty for employers to enroll employees into a pension scheme

Where a designated employee is not an active member of an approbated pension scheme, the employer will be required to enroll them in an appropriate scheme or in Guernsey and Alderney Pension Trust, which is the SoG Scheme that has been established.

Data Protection

The law gives the right of the employer to share the employee's information with the plan administrator without the employee's consent.

Contributions and Transition Dates

This means > equal to or more than and < means equal to or less than as long as the two figures match the Total figure when added together.

Minimum%	2024 (Yr 1)	2025 (Yr 2)	2026 (Yr 3)	2027 (Yr 4)	2028 (Yr 5)	2029 (Yr 6)	2030 (Yr 7)	2031 (Yr 8)	2032 (Yr 9)
Employer	>1%	> 1%	> 1%	> 2%	> 2%	> 3%	> 3%	> 3%	> 3.5%
Employee	<1%	< 1%	< 1.5%	< 2%	< 3%	< 4%	< 5%	< 6%	< 6.5%
Total	2%	2%	2.5%	4%	5%	7%	8%	9%	10%

Transition Dates	1 July 2024	1 Oct 2024	1 Jan 2025	1 July 2025	1 Oct 2025
Number of Employees	> 26	> 11	> 6	>  2	1

These are the minimum percentages contributable to applicable gross earnings which is limited to the upper earnings limit. (2023: £3,240.00 per week and £14,040.00 per month).

Employers who will or are already paying more than the minimum required amount will cover their employee's liability. 

Loans

The law permits loans from approbated pension schemes, with the typical limit being the tax-free lump sum allowance. However the law there is only a permitted use which is home improvements on their primary residence. This may prove a challenge for personal RATS where they have a loan which cannot be evidenced for this purpose, for example, they purchased a car.

What is not yet understood is how this may actually work in practice and we fully expect scheme administrators to apply approbated compliant plans, separate from RATs that have been established and hold property or other complex assets. 

The law is also not clear on who would be liable if contributions are made to a non-compliant plan. As an employer, it would be practical to seek assurances from the scheme administrator.

Penalties

There are some very significant penalties that can be levied under this law

Failure to make returns is £300 for missing the date of the return and £50 per day thereafter.

Fixed penalty notices apply to compliance and unpaid contributions, this cannot exceed £50,000 but is determined by the scale of the non-compliance. Failure to pay this can result in an escalating penalty on a daily basis not exceeding £10,000.

There are the following offenses Failing to Comply (S21) and False or Misleading Information (S23). This has the following powers such as imprisonment not exceeding 2 years and a fine not exceeding twice the level 5 on the uniform scale.

Warning: Please note the above is guidance and the opinion of Fairfield Wealth and cannot be relied upon without seeking a formal engagement with Fairfield Wealth.