The Department for Work and Pensions (DWP) has published a call for evidence on whether the alternative benefit quality requirements for UK defined benefit (DB), hybrid, and collective defined contribution (CDC) schemes are working as intended.

The consultation forms part of a statutory review of the operations of the regulations, which are set out in the Pensions Act 2008.

Employers who choose to use a DB, hybrid or CDC scheme to meet their auto-enrolment (AE) duties must ensure their scheme meets the minimum quality requirements, while CDC schemes can also choose to satisfy one of two alternative tests.

DB and hybrid schemes must ensure they either meet test enabling schemes to use the money purchase quality requirements, which meet prescribed requirements based on existing quality requirements for DC schemes, or a cost of accruals test, which is based on the cost to the scheme of the future accrual of active member benefits.

Unconnected multiple employer CDC schemes will be permitted to satisfy either the DC test, which looks at the proportion of jobholders in different cohorts for whom total contributions are at least the AE minimum, or the alternative CDC test, which is an alternative cost of accruals test.

Single or connected employer CDC schemes are only permitted to satisfy the alternative CDC test.

Regulations in section 23A(1) of the Pensions Act 2008 outline the alternative quality requirements for DB schemes used for AE, with the requirements allowing for simpler alternative tests to be used so a scheme can demonstrate it can fulfil AE duties.

The DWP’s call for evidence aims to understand whether the government’s policy objectives are being met, how the simplifications and flexibilities operate in practice, and whether any new issues have arisen since the last review in 2023.

In its review of alternative quality requirements for CDC schemes, the call for evidence is seeking views on the alternative quality requirement available to both single or connected employer and unconnected multiple employer CDC schemes.

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