What is a Qualifying Pension?

A Qualifying Workplace Pension Scheme will be one that matches certain criteria, particularly in regard to the level of pension saving imposed. Broadly speaking a Qualifying Workplace Pension Scheme will need an overall contribution of 8% of qualifying earnings. A typical QWPS will match the Personal Accounts contribution shape of 3% from the employer, 4% from the employee and 1% from the taxman grossing the employee’s contribution up for basic rate relief. The Personal Accounts scheme, as you may know, will itself be a massive QWPS that is being built to act as a default option for employers who don’t set up their own QWPSs.

Employers will have the option of postponing auto-enrolment for period of 90 calendar days and thus cutting out some of the administaration if they are prepared to run schemes that meet a ‘quality’ mark.

Schemes that achieve the quality mark will be called Quality Qualifying Workplace Pension Schemes (QQWPSs) and can be thought of as a sort of GTI version of a QWPS.

The regulations say that all existing defined benefit schemes that currently meet something called the Reference Scheme Test will be classified as QQWPSs. For defined contribution schemes, both occupational and personal pension based arrangements, the quality mark can be achieved if the total contribution to the scheme is 11% of qualifying earnings, with the employer paying at least 6% of that.

If an employer does not wish to use a pension scheme that it has already established, it will be able to use a scheme that meets the qualifying criteria and is available in the market place. The National Employment Savings Trust (Nest) is the central scheme set up by the Government for this purpose.

See the Pensions Regulator's detailed guidance on Pensions schemes (PDF format, 230K) (on the Pensions Regulator website) for further information about the standards that a scheme must meet to be a qualifying scheme.