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Overview of the defined benefit (DB) transitional period

Pension schemes with defined benefits are mainly used by large employers and some employers in the public sector, and are sometimes also known as 'final salary' or 'career average' schemes.

The transitional period applies to staff who are entitled to join your client's pension scheme with defined benefits. When the transitional period ends, workers that were covered by it must be assessed and put into your client's pension scheme with defined benefits if they need to be automatically enrolled. 

Your client may also have chosen to apply the transitional period to staff who were already in their pension scheme with defined benefits on their staging date.

How to tell if your client used the transitional period

If your client is unsure whether they used the transitional period, they can check:

  • their payroll software
  • their staff records to see the letters they wrote to staff telling them they were applying the transitional period to these workers
  • the acknowledgement of their declaration of compliance that we sent out to them

If any workers weren't assessed on the staging date and later become eligible jobholders during the transitional period, your client may miss the enrolment date and therefore be unable to use the transitional period. This is because all workers need to be given notice within six weeks of their enrolment date, which your client would have missed.

What your client needs to do before 30 September 2017

Your client should carry out some actions before the transitional period ends to help make sure they're ready to comply with their automatic enrolment duties:

  1. Check their records and work out which staff this applies to. They should check the letters they sent to staff to tell them they were applying the transitional period to them, or check their payroll software. Some of these workers may now have left your client's employment since their staging date.
  2. If this applies to a large number of staff, your client should notify their pension scheme provider that they will potentially be putting a large number of members into their pension scheme at the same time.
  3. Check if they need to make changes to their payroll software or payroll processes. If your client is unsure what to do, they should check with the person who manages their payroll, or their software provider.
  4. Check that their pension scheme rules allow them to put the affected staff into the scheme for automatic enrolment. If your client is currently using their pension scheme with defined benefits for automatic enrolment with other staff, they don’t need to do anything, unless your client also has a defined contribution (DC) scheme, which some staff were enrolled into during the transitional period. The workers who had the transitional period applied to them must be put into your client's pension scheme with defined benefits. If they're unsure, they should speak with their pension scheme provider.

What your client needs to do on 1 October 2017

Your client will need to take the following steps to ensure they comply with the law:

  1. Your client must assess the staff that the transitional period was applied to, and work out which of them need to be put into a scheme for automatic enrolment.
  2. If any of these staff meet the age and earnings criteria for automatic enrolment, your client must put them into their defined benefit pension scheme set up for automatic enrolment. They also need to start making contributions to the scheme.
  3. Before 11 November 2017 they must write to each member of staff that has been put into a pension scheme to tell them how automatic enrolment applies to them. We have letter templates available to help your client do this.

Using postponement

Your client can delay assessing their staff on a one-off basis for up to three months from 1 October 2017 by applying postponement. If they choose to do this, your client must give the postponement letter to these staff on or before 1 October 2017. 

Please note that this differs to postponement in most automatic enrolment cases, where the employer has six weeks and a day to give the postponement notice.

Your client should also be aware that, even if they choose a postponement date within the six week period, they will be reducing the amount of time they have to complete the necessary steps for automatic enrolment, as they only have from 1 October 2017 until 10 November 2017 in which to do so, at most. For example, if the deferral date was 10 November 2017, the employer would only have one day left of the joining window where they can complete the steps required for automatic enrolment.

Unlike using postponement at other times, if the transitional period has been applied, postponement can only be used once. If a non-eligible jobholder is postponed and then after the transitional period elapses they become eligible for automatic enrolment, they must be enrolled in a pension scheme. They cannot be postponed again.

Your client can make use of all automatic enrolment exceptions at the end of the transitional period, apart from one - they cannot choose not to enrol a worker who has given notice of the end of their employment. These workers must be put into a pension scheme. 

Ongoing duties

Your client doesn't need to change their declaration of compliance or re-declaration to tell us that they've completed their duties at the end of the transitional period.

Your client has ongoing duties for staff that had the transitional period applied to them:

  • if any of these staff do not meet the age and earnings criteria for automatic enrolment on 1 October 2017 (or after the end of their postponement), your client needs to assess them each time they subsequently pay these staff to see if they qualify - and, if they do, they will need to be put into your client's scheme with defined benefits the first time they qualify
  • contributions need to be backdated to 1 October 2017 for staff that meet the age and earnings criteria on 1 October 2017, or after the end of their postponement - your client won't be able to use postponement for these staff 
  • for all other staff, your client will need to carry on their business as usual automatic enrolment duties each time they pay these workers

It is your client's legal duty to comply with the law. Failure to meet their duties could result in further action from The Pensions Regulator, including fines.