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Gibraltar, Guernsey: Proposals on auto-enrolling employees in retirement plans

Total Rewards|Health and Benefits|Retirement
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By Michael Brough | December 23, 2020

Gibraltar and Guernsey propose requiring auto-enrollment of employees in a retirement savings plan with minimum employer and employee contributions.

Employer Action Code: Monitor

The respective local governments of Gibraltar (a British Overseas Territory) and Guernsey (a British Crown Dependency) have approved separate proposals that would obligate employers to automatically enroll eligible employees into a qualifying retirement savings plan and require minimum employer and employee contributions. In Gibraltar, parliament passed primary legislation (Private Sector Pensions Act 2019) calling for a phase-in of the employer obligation starting July 2021, though the legislation is not yet in operation pending formal notification by Gibraltar’s Minister with responsibility for finance. Guernsey is targeting a January 2022 launch of phased implementation of its proposed Secondary Pensions regime; however, this timing was based on the development of primary legislation in 2020, which appears to have been delayed.

The Isle of Man (a British Crown Dependency) is also considering whether and how to expand employee participation in private retirement plans, though it is earlier in the process. Its government is currently considering responses to a public consultation on the subject.

Key details

Gibraltar

  • The obligation would apply from July 1, 2021, for large companies (as defined in the Companies Act 2014); July 1, 2022, for medium companies; July 1, 2025, for small companies; and July 1, 2027, for micro companies. The criteria are based on a combination of asset and revenue thresholds as well as number of employees (large companies have 251 or more employees; medium, up to 250; small, up to 50; and micro, up to 10). 
  • Eligible employees would be those earning over 10,000 British pounds per year who have at least 12 months of service with the employer. Employees would be able to opt out of participation.
  • Employers and eligible employees would each have to contribute at least 2% of earnings to individual employee defined contribution (DC) accounts (or equivalent amounts to a defined benefit [DB] plan).
  • Employers could use existing qualifying plans, provided they meet or exceed minimum requirements.

Guernsey

  • The obligation would initially (targeted for January 1, 2022) apply to employers with 25 or more employees and then extend in steps over 15 months to all employers.
  • The initial minimum contribution rate to employee DC accounts would be 2% of covered earnings, of which at least 1% must be paid by the employer. Rates would increase annually until reaching 10% in total after seven years, with the employer’s portion being at least 3.5%. Covered earnings would be defined as for social security, so employees earning below the lower earnings limit (7,696 pounds in 2021) would not be required to participate.
  • Employees would be able to opt out, subject to automatic re-enrollment every three years, with the option to opt out again.
  • The government would set up a central DC plan (Your Island Pension – YIP), externally managed, as an option for employers that do not wish to establish their own plans (similar to the U.K.’s National Employment Savings Trust – NEST). The private pension market is populated by a large number of Retirement Annuity Trusts (RATS), which, along with certain other existing private plans (DC or DB), could be used as qualifying schemes subject to certain conditions.

Employer implications

Affected employers should monitor the proposed legislation and consider how they will comply with the expected new requirements.

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