What a good pension scheme looks like

The Pensions’ Regulator has published details of what an employer pension scheme should offer and our service is aligned to this guidance. This ensures our clients have compliant, low-risk pension schemes which are highly valued by employees.

Delivering good outcomes for pension members

There are six elements necessary for pension scheme members to achieve a good outcome from their company pension, which is an adequate income in retirement. Our service is committed to deliver these principles:

  • Appropriate contribution decisions
  • Appropriate investment decisions
  • Efficient and effective administration
  • Protection of the pension through governance
  • Value for money
  • Informed decisions at retirement

Our support for employers

Core services

  • Annual scheme governance report
  • Annual governance review meeting
  • Scheme project planning ‘road-map’
  • Unlimited employer helpdesk

Additional services

  • Salary-for-pension exchange financial modelling report
  • Salary-for-pension exchange implementation
  • Pension contribution benchmarking
  • Additional teleconference or face-to-face meetings

Our support for employees

Core services

  • Goal-based retirement planning
  • Retirement service
  • New employee information and advice
  • Unlimited member helpdesk
  • Transfer advice
  • Investment risk assessment for all members
  • Risk-graded investment funds

Additional services

  • Face-to-face pension clinics
  • Online webinar clinics
  • Group presentations
  • Bespoke and personal investment advice
  • Full retirement service

“Appointing Wingate Benefit Solutions as our pensions advisers is undoubtedbly one of the best decisions I have made in my seven and half years with Blackpool Transport. Both the speed and the quality of Wingate’s responses have been excellent and I have been particularly impressed by the way in which they have always been prepared to go the extra mile in looking after the company’s interest and ensuring we are provided with the best possible data and information. I would recommend Wingate to any other company.”

Blackpool Transport
Managing Director

Salary Exchange (also known as Salary Sacrifice) has been around for many years and is the term used to describe an agreement where an employee give up some of their salary in return for a non-cash benefit. Generally, Salary Exchange has always been a great win for an employee as it has allowed them to ‘purchase’ certain benefits and take advantage of the preferrable tax position and NI position that Salary Exchange creates. Often, an employer would also benefit from an employee using Salary Exchange by way of a National Insurance saving.

As Salary Exchange grew in popularity over time, certain ‘non-standard’ items became the norm with employees having the ability to purchase mobile phones, IT equipment, accommodation, gym memberships, school fees and many more. In 2016, the then chancellor, Philip Hammond (remember him) announced that with effect from April 2017 the only allowable items that can be used for salary exchange purposes would be significantly reduced. These are:

  • Childcare Vouchers
  • Ultra-Low Emission vehicles
  • Cycle to work
  • Pension contributions

Mr Hammond never stated the reason for this change, but one can conclude that this was connected to HMRC losing out on National Insurance contributions and the generous system that was in place being abused by the few who ruined it for the many.

Whilst Childcare vouchers, Ultra-Emission vehicles and Cycle to work salary exchange schemes will be attractive to some based on their personal position, the only salary exchange scheme that could positively affect the majority of people is Pension contributions.

Every employer in the UK should now have a pension in place and will undoubtedly have members contributing into the plan of the employers choosing but does the employer use/allow salary exchange as a pension contribution basis?

Salary exchange is a tax efficient way for employers and employees to save money, potentially using the saving to improve any employee benefits offering provided to employees.  The main financial advantages are the National Insurance savings for both the employer and its employees with the employees also saving tax too.

Some employers are concerned about how hard it is to establish a salary exchange arrangement but please be assured, it can be a relatively straight forward process. The arrangement will need to be agreed by the employee as they are giving up an element of salary in lieu of an increased pension contribution and therefore there will be a need for contracts to be reviewed/amended using a side letter or an opt-out option. Advice from a legal adviser should always be sought to understand the most appropriate process for the employer. Once in place the arrangement can be offered to some or all your employees so long as their salary does not drop below the minimum wage.

From the employee’s perspective they do not need to adopt Salary Exchange as a pension contribution method and can chose to opt of it whilst remaining in the pension. Historically members have sometimes been sceptical about such arrangements and therefore the benefits to employees must be explained by experienced advisers. In the past, adopting salary exchange could have affected the borrowing ability of the employee for a mortgage but most mainstream lenders in the current climate will calculate lending based on the notional salary, i.e., the salary before the exchange.

In today’s climate where costs to the business and the businesses bottom line are key, there is certainly a conversation that needs to be had between advisers and employers around the pro’s and cons of salary exchange.

If you are an employer that falls into that bracket, please contact one of the team at Wingate Benefit Solutions on 01883 332260 or at info@wingatebs.com

 

 

Since the first lockdown parts of the economy and businesses have been suffering hardship and unfortunately the recent lockdown has not helped. Who knows what is around the corner with the forthcoming regional tiered lockdown?

To date there has been some help from government with the initial furlough scheme covering some wages and employer pension costs. Unfortunately, each new version of the furlough scheme has been less generous. The current scheme which is available until 31.03.2021, only covers 80% of wages up to a cap of £2,500 per month and no contribution towards employer national insurance and pension contributions.

It is sometimes forgotten that an employer has a legal obligation to maintain employer pension contributions regardless of whether staff have been furloughed. Failure to fulfil this requirement may lead to legal action by The Pension Regulator (TPR). Unfortunately, The TPR’s quarterly compliance and enforcement bulletin has highlighted there has been an increase in unpaid contribution and compliance notices compared with last quarter. The quarterly bulletin shows a 191.4% increase in unpaid contribution notices from 352 to 1,026 and a 17% increase in compliance notices from 13,185 to 15,420 compared to the previous quarter.

If you are having problems making contributions, there are options available. The first of which should be to contact the regulator, TPR via 0345 600 1011 who may be willing to issue an easement notice to give you time to catch up on any missed contributions.

Also if you are contributing more than the minimum contributions or have self-certified via one of the three tiers a review by a qualified pension adviser such as Wingate BS may highlight the ability to reduce contributions to the statutory minimum which could significantly reduce the employer (ER)pension contributions.

There are a number of factors you should consider when deciding to decrease the ER contribution, including:

  • your employment contracts with your staff and whether any changes need to be made, by agreement. You may wish to seek legal advice on the process.
  • any agreements you have with recognised trade unions or other staff representative forums to discuss or notify of such changes.
  • the rules or governing documentation of the pension scheme you use, whether these currently permit you to reduce your contributions to the statutory minimum or whether you will need a change to the scheme rules. If the pension scheme you use is a Group Personal Pension, you might be able to do this by changing the arrangements you have for paying contributions without the need for a new or amended contract. If you are unsure of your scheme provisions, you should speak to your scheme trustees or provider.
  • who has the power under the rules to make changes if you have a trust-based scheme,this might be you or the trustees or a shared power. If the power is a trustee power or shared power, you will need to engage with the trustees of your scheme. Even if you have the power to amend the scheme rules, we would recommend that you notify the trustees beforehand.
  • whether there are rules that apply under pensions legislation, even if employment law permits. For example, employers with at least 50 employees with a defined contribution pension scheme, are legally required to consult with members if they are making changes that decrease employer contributions.

There are other changes which could be considered such as delaying  new joiners being added to the scheme and introducing salary sacrifice which could lead to considerable ER national insurance contribution savings and these savings could help pay towards the cost of ongoing ER pension contributions. Some legacy pension schemes set up at the start of auto enrolment can have monthly administration charges payable to the insurance company, a review of the scheme could result in the removal of this cost.

If you would like to discuss your options to maintain compliance with pension legislation whilst reducing the cost of running and contributing to the pension scheme, please get in touch.

 

 

The government are currently making a massive push to ensure that individuals age 50 or over understand the options available to them with Defined Contribution (DC) pensions which may either be a personal one, workplace one or both.

To do this the government are promoting the services of Pension Wise which is a free and impartial service set up by government in 2015 which offers guidance for people regarding their options at retirement. Demand for the Pension Wise service has grown every year since its launch in 2015. In 2019/20, the Money and Pensions Service delivered over 200,000 Pension Wise interactions, including telephone appointments, face to face appointments and online sessions, more than triple the number delivered in the service’s first year.

All in all, I truly believe that access to Pension Wise should be seen as a positive and the fact that the government are promoting this service should be commended however…once a Pension Wise appointment has been attended, what happens next.

As part of the appointment with Pension Wise, they will present options to the individual which will guide them down a particular path leading to one of several outcomes which could include but is not limited to:

  • Full Encashment
  • Annuity Purchase
  • Flexi Access Drawdown

Once the end of this path is reached the adviser at Pension Wise (who cannot give advice on the most appropriate option) will recommend that the individual visits a website called unbiased.com and seek advice from a qualified financial adviser who can then put into place a plan which meets the needs of the individual. As the qualified financial adviser will need to carry out their own fact find on the individual to provide advice, would the individual have been better off going to the financial adviser in the first place? I am not saying that there is no value to the Pension Wise service, it certainly has its place and a general information service certainly saves time than carrying out your own research but…

If my car broke down or had a problem, I would take it to a dealer or local garage to understand what is wrong with it and find out what needs to be done to fix it. Of course, cost and potentially length of time to fix the problem would be factors in my decision in using a particular garage/dealership but at least I would have all the facts with which to decide.

If we compare this to the Pension Wise service, they would very much be able to diagnose the problem with my car, tell me what needs to be done to fix but in effect direct me to the garage down the road as they can’t actually fix my problem. If this happened to me I may possibly think that my time spent with Pension Wise was OK, but not necessarily the best use of my time and that perhaps I should’ve just gone to the garage/dealership down the road in the first place.

Don’t get me wrong, Pension Wise certainly has a place in the market and for many people it will be an invaluable resource from which to obtain guidance around retirement options and the next steps available however taking the above into account, should an individual just go to a qualified Financial Adviser in the first instance?

If you would like to learn more about Wingate Benefit Solutions standard workplace pension service proposition which includes pension access guidance as a minimum, then please contact Wingate on 01883 332260 and info@wingatebs.com

I expect you have been inundated by emails related to Covid and the Coronavirus Job Retention schemes (CJRS), unfortunately a lot of them are full of jargon and not necessarily relevant to your circumstances. At Wingate we have been in regular contact with our clients and understand acutely as an employer ourselves, what is needed in plain English. With this in mind I will be publishing a series of useful blogs on the developing situation and the impact on employee benefits and pensions in particular.

HMRC have now launched The Coronavirus Job Retention Scheme (CJRS) and a number of you will have already made a claim but just to reiterate, you will need the following information for each furloughed employee:

  • National insurance number
  • Salary, NI and pension contribution information for you to calculate the claim amount

If you are implementing Furloughing via the government scheme the government will make the 3% minimum employer contributions required under automatic enrolment (AE), subject to the relevant caps although this may be lower than the employees’ contractual entitlement. Further information on the minimum contribution structure can be found via:

https://www.thepensionsregulator.gov.uk/en/employers/new-employers/im-an-employer-who-has-to-provide-a-pension/choose-a-pension-scheme/understanding-your-costs/making-contributions-to-your-pension-scheme-

Therefore you may be required to top up employer pension contributions. Further information can be found via the link below and where to submit a claim:

https://www.gov.uk/guidance/claim-for-wage-costs-through-the-coronavirus-job-retention-scheme

https://www.gov.uk/guidance/claim-for-wages-through-the-coronavirus-job-retention-scheme

The Pension Regulator has a dedicated section on their website regarding the implication for employers and pension schemes at:

https://www.thepensionsregulator.gov.uk/en/covid-19-an-update-for-trustees-employers-and-administrators

Salary sacrifice/Smart pension contributions

I expect if you have a pro-active adviser or have recently set up your company pension scheme the default contribution method is likely to be via salary sacrifice on either an opt out or opt in basis often referred to as Smart pay.  The Pension Regulator and HM Treasury have recently updated their guidance regarding the interaction of salary sacrifice on pension contributions and Furloughed employee claims which is different to earlier guidance.

“You cannot include the following when calculating wages:

Non-monetary benefits like benefits in kind (such as a company car) and salary sacrifice schemes (including pension contributions) that reduce an employees’ taxable pay

Where the employer provides benefits to furloughed employees, including through a salary sacrifice scheme, these benefits should be in addition to the wages that must be paid under the terms of the Job Retention Scheme.”

The Treasury has confirmed this means in all instances that where employers operated salary sacrifice in the pay period being used as ‘reference pay’ for CJRS, you will only be able to claim 80% of post sacrifice pay. For example:

  • Reference pay to 19.03.2020 £2,000
  • Pension contribution 5%
  • Post sacrifice pay £1,900

An employer can only claim £1,900 * 80% = £1,520 to cover wages and must pay this to the employee as a minimum wage and can’t deduct the employees 5% sacrifice contribution from the £1,520 received. Subject to the scheme rules and the employee’s contractual entitlement, you may be required to make the employees contribution upon their behalf. However if you top up the CJRS, the employee’s salary sacrifice deduction can be deducted from the top up amount.

Please note that for schemes of less than 50 lives, The Pension Regulator has removed the need to consult staff regarding any pension contribution changes as long as they are temporary and apply only during the lockdown period.

It should also be remembered that all pension contributions are a percentage of earnings so if pay reductions are implemented either due to furlough or implementing temporary pay cuts, the employee and employer pension contribution monetary amount deducted will also reduce. However employees are able to vary their contribution percentage if they wish, subject to statuary minimums and scheme rules, they could choose to take a payment holiday or leave the salary sacrifice scheme. Although it should be noted that leaving the salary sacrifice scheme would not impact the calculation of wages for the CJRS scheme.

If you are struggling to make employer pension payments, we would recommend you contact The Pensions Regulator directly on 0345 600 2475 who are available Monday to Friday – 9am to 5pm to discuss your situation.

I hope you have found this information useful and feel you would benefit from a more pro-active pension governance service from an independent financial adviser please get in touch with myself by mobile 07775692128 or email mathew.rann@wingatebs.com .

How Long Is A Piece Of String?

Typically, the main queries I’m asked as a Pension Adviser from members of Workplace Pensions tend to revolve around the level of income that they may need in retirement.

How much is enough?
What is the average?
What do others do?

These are the commonly asked questions and as an adviser it is like asking ‘How long is a piece of string?!

The only way to understand someone’s true income in retirement is to work through a budget plan with them based on their current scenario and make assumptions around which of those items won’t be around at retirement. This analysis should leave the member with a ‘target’ income to aim for at retirement and this is where the need for advice kicks in as the member usually then requires recommendations as to how they can reach their income goal.

At 42 years of age, if I was asked what income I would need in retirement, I’d only have half an idea as it is not something I have given much thought too as it is still quite a time away. However, like many others during the current Covid19 lockdown, my wife and I have spent some time tightening our belts by reducing unnecessary costs since my wife has been furloughed from her current role in the leisure industry. A few voluntary measures that we have taken include taking a mortgage payment holiday and temporarily freezing our Sky and BT Sports subscriptions (this hurt quite a bit). Enforced measures that we are experiencing revolve around reductions in our entertainment spending, such as fewer takeaways, less fuel for the car, not being able to take the kids out for entertainment (big savings here) as examples.

When we now look at our bank account, could this be what our future outgoings may look like? We’d like to think our mortgage will be paid off by the time we reach retirement although if I have my way, we’ll keep my Sky and BT Sport subscription. Will we need two cars? Will we go out as much? Will we be spending money on the kids…grandchildren? We don’t know the answers to these questions, but we think that the Covid19 situation has made us a little more in tune with what the future might look like. Now that we know what this figure might be, we can now look at what pensions we have and plan accordingly in terms of what these may give us as an income.

As part of Wingate Benefit Solutions Standard Pension service, we put planning for retirement at the heart of our Pension Member Services. We produce personalised member reports which are designed to empower a member to take control of their retirement planning and help them understand what their retirement income objectives are and whether they are on track to achieve these goals.

Our report is very effective because it clearly sets out information and solutions in a format that people can understand and as such, value. A member can include not only their current employers’ workplace pension but also any other pensions that they may have already accrued, regardless as to whether these pensions are defined contribution or defined benefit schemes. As these reports come at no cost to the member, the member can ask us to run as many scenarios as they would like to really nail down their plan for retirement, looking at different angles such as:

What if I change my retirement date?
What if I pay a little more in?
What if I don’t pay in as much?

By adopting Wingate’s Standard Pension service, an employer can really add value to their workplace pension offering to make their pension scheme stand out as a valuable benefit for their staff as part of their overall benefits package, designed to attract and retain quality members of staff.

For more information on Wingate’s Standard Pension Service, please contact one of the team at Wingate on 01883 332260 or at info@wingatebs.com

Pension Contributions – What Basis?

Automatic Enrolment legislation has now been around for 7-8 years and apart from the big FTSE companies and large SME’s who were likely to have already had established pension arrangements, I don’t think it’s unfair to say that ‘some’ pension arrangements may have been set up a little hastily with ‘being compliant’ being the absolute priority.

As in individual, do you do still do the same things in your personal life that you did 7-8 years ago? I know I do however there are some things that I regularly review, and these tend to be financial things.

Now that Automatic Enrolment is in a steady state and businesses are taking a deep breath before having to deal with the fallout from Brexit and the recent election, now may be a good time to sit down as an employer and review your pension scheme to see what is in place and whether it is still fit for purpose. Questions an employer may want to ask themselves could be:

• What does a perfect workplace pension look like?
• What outcomes are my employees expecting at retirement?
• How as an employer can I help my employees get the best outcomes for them?

One of the areas we at Wingate regularly get asked about are contributions. Not on the levels that are being paid, but instead, how the contributions are paid.

By way of some background, there are three ways an employer may wish to deduct pension contributions from an employee’s pay. These are summarised as follows:

Relief at Source

Pension contributions are taken from pay after it has been taxed. The pension provider then automatically adds 20% tax relief to employee contributions for all taxpayers with higher and additional rate taxpayers having to claim back extra tax relief personally.

Net Pay

Pension contributions are taken from pay before it has been taxed. This means that the employee’s contribution automatically receives tax relief at their marginal rate of tax and is not required to complete a self-assessment return.

Salary Exchange

Salary Exchange is an agreement between an employer and an employee where the employee exchanges part of their contractual gross salary or bonus in return for a non-cash benefit, in this case pension contributions.

Of course there are advantages and disadvantages to all the contribution basis’ summarised above however the choice on which option to use falls into the lap of the employer as they are in effect the ones who are setting up and managing the plan on an ongoing basis.

Currently there is a lot of noise in the pension industry now about how low paid earners are potentially missing out on tax relief on pension contributions if they are members of a workplace pension scheme that operates on a Net Pay basis. In the last general election, the government even made reference to this issue and confirmed that they will undertake a review however a timeline has not yet been published.

Whilst there are lots of action groups pushing the government to review and potentially abolish the Net Pay option based on the lost millions of tax relief throughout the country, surely some responsibility sits with the employer themselves who have the ability to select and subsequently change the contribution method to one of the other options stated above or even go to the lengths to change provider if the incumbent provider doesn’t facilitate the wishes of the employer.

At Wingate, we can help employers understand all the above and more and provide recommendations for new arrangements or just small tweaks to existing arrangements. If this is something you may be interested in, please feel free to contact Wingate on 01883 332260 or at info@wingatebs.com

Auto Enrolment Pension Contribution Basis – Self Certification

It is now 12 years since the government introduced the Pensions Act 2008 which led to the most significant change to workplace pensions for a decade, “Auto Enrolment”. I expect you assume like most employers that auto enrolment is finished and adding staff to the pension is another monthly task and its back to business as usual. Unfortunately, like most things in life, it’s not that simple.

Cast your mind back to your staging date which if you like me you can’t remember what you did last week, this might be difficult as most employers staged at least 3 or more years ago.

I bet you didn’t know it is a legislative requirement to have a valid Auto Enrolment Scheme Certificate in place for the qualifying pension scheme that the company contributes to, where contributions are certified on an alternative basis to Qualifying Earnings. The maximum period a certificate can be valid for is 18 months. So if you haven’t updated your certificate since you’re staging date it is likely the original certificate will have expired.

Some employers may have an up to date certificate but when asked whether they have tested that their contributions comply with their chosen contribution basis, they don’t know what we are talking about. In particularly this applies to the Tier 2 and the Tier 3 bases.

Can you remember what contribution basis you choose? If you outsourced this process to your accountant, payroll provider or financial adviser you may have no idea. Just to summarise there are 4 contribution basis (see below) you could use and you can have different basis applying to different staff within your payroll.

Qualifying Earnings

These are all P60 earnings between stated Lower and Upper thresholds, which are reviewed annually; any earnings outside of these amounts are ignored for contribution purposes. The current Lower and Upper Thresholds and statutory minimum contribution rates from 6th April 2019 are shown in the tables below:

  2019/2020
Lower Limit £6,136 (£512)
Upper Limit £50,000 (£4,167)

 

Employee Contribution Employer Contribution Total Contribution
5% 3% 8%

Basic Pay Tier 1
Contributions are based on pensionable pay provided it constitutes basic pay.

Employee Contribution Employer Contribution Total Contribution
5% 4% 9%

Basic Pay – Tier 2
Contributions are based on pensionable pay provided it constitutes basic pay and this is at least 85% of total earnings the ratio of which can be calculated at scheme level.

Employee Contribution Employer Contribution Total Contribution
5% 3% 8%

Total Pay – Tier 3 basis.
All elements of pay are considered pensionable under this basis e.g. P60 earnings.

Employee Contribution Employer Contribution Total Contribution
4% 3% 7%

Tier 3 requires you make sure that every element of pay (P60 earnings) has been subject to pension contributions. For example, overtime which may happen occasionally for some staff, did the payroll system subject the overtime to pension contributions or not?

For Tier 2, does basic salary to which the contribution rates apply constitute 85% of P60 earnings at a pension scheme level? We have recently come across a number of employers who have met this criteria in previous years but not in the current year due to commission and bonus payments which have become payable from long term incentive schemes.

Unfortunately as you can see the self-certification process and Auto Enrolment process needs to be revisited on a regular basis to insure compliance. It’s a bit like the “bad penny” that keeps showing up. Obviously you could cross your fingers and toes and hope you are complying but that is a high risk strategy because if you are found to be making incorrect contributions even if this is due to a lack of knowledge, you would need to make good any shortfall on behalf of employees which could be a costly exercise.

Why is this so important? Well The Pension Regulator (TPR) has taken enforcement action against over 4,000 employers who have failed to carry out their re-enrolment duties in this year alone, resulting in over 800 penalty notices and fines being issued for continued non-compliance.

Therefore if you want to sleep soundly at night we would recommend you engage with a specialist to carry out an assessment of your compliance with Auto Enrolment legislation with the view to putting in place a clear pension governance strategy in case of a spot check from the regulator.

At Wingate we offer a free pension review service which would highlight any compliance issues and how to resolve them. This could avoid an unexpected fine, backdated contributions and the additional administration involved in remedying any errors. Please contact Wingate if you would like to see how we can assist you with your ongoing pension governance and review your existing processes’ free of charge.

A goal without a plan is just a wish

We all dream, don’t we? Sometimes these dreams are good dreams, sometimes they are not so good. We tend to wake after a dream with thoughts on what has just happened, asking ourselves, what the hell does that mean and often, how can I make that dream come true!

An example of this is the National Lottery. We all dream about winning the lottery and we act on that aspiration by buying our ticket/s and keeping our fingers and toes crossed that our lucky numbers will be plucked out on a weekly basis. In the case of the lottery, we dream about winning but ultimately unless we buy every ticket available, we have no real control on the outcome.

Let’s apply this same theory to Pensions (sorry, very tenuous link I know). If we are employed and haven’t opted out of our workplace pension, we are paying into our pension and our employer does too. If we don’t pay any interest to what is happening with our pension in terms of how much is invested or where the funds are invested, we are simply ambling along ‘wishing’ that the outcome may be good and that we can retire happily without a care in the world. This is our dream but without scrutiny around understanding our pension more, this dream could turn into a nightmare.

Let’s turn this on its head for a moment. If I have a retirement goal of a certain income level at retirement and I know what it will cost me to fund my pension to reach my target, this is the ideal, informed situation to be in. Now don’t get me wrong, the additional contribution levels needed could be very high and although I could try and reduce some other current spending to fund my pension, is this something that I want to do? Probably not. However, if I am aware of the shortfall and the cost of funding that shortfall at least I have the information required to take steps if my current financial position allows.

At Wingate, every member of a workplace pension for whom we provide our Standard Workplace Pension services to their employer has access to our member engagement services, one of which is our retirement forecasting service. Our retirement forecasting service is designed to help members understand what income they could receive in retirement. The results of this are very enlightening and help members better understand what their pension may offer; it also highlights whether they are making sufficient contributions to obtain the level of income in retirement they aspire to or whether they face a potential funding gap.

A common misconception is that employees believe that their company pension will sufficiently fund their retirement, as it is an employer sponsored arrangement. The retirement forecasting service helps prevent this misconception and helps to highlight the value of the employer’s contributions. The report is free to the member and can be updated as often as the member requires to reflect a change in their personal circumstances in the build up to their anticipated retirement date.

To help your employees fulfil their financial goals in retirement, please contact Wingate for more information on our services, on 01883 332260 or at info@wingatebs.com

Pension Governance: Why it’s important

Following the introduction in the Pensions Act 2008, of Automatic Enrolment, most employers have now staged and set up their Qualifying Workplace Pension scheme. There is a misconception that Auto Enrolment is finished, and it is back to business as usual. Unfortunately, its not that simple. The Pension Regulator (TPR) also requires employers to make sure that their workplace pensions are monitored regularly and deliver good retirement outcomes for members.

TPR wants to see all pension schemes encompassing 6 key elements, the first 3 listed below are mostly relevant for scheme set up whereas elements 3-6 cover activities that will remain relevant throughout the life of a scheme. TPR believe that if schemes follow these 6 principles in their design, set up and ongoing operations it will help ensure the scheme delivers ‘good member outcomes’.

1. Durability, Fairness and Delivery: TPR wants to see that a company pension offers a suitable default fund, carries transparent costs and charges and has steps in place to protect its members’ pension assets against loss of their savings.

2. Establishing a framework: TPR wants to see that all parties involved in managing a company pension scheme have clearly defined roles and that they continually carry out these roles to a highly competent level. The parties involved could include the employer, the chosen pension provider and the appointed advisers.

3. Accountability: Once the roles for each party have been defined, TPR expects each party to be accountable for their part in the ongoing management of the pension. TPR expects each party to have the required resources to carry out their role efficiently.

4. Ongoing Pension Governance: Due to the long-term nature of pensions, TPR wants to ensure that the scheme continues to have excellent ongoing pension governance and that internal controls and monitoring are in place to meet its objectives so that the best interests of the member are prioritised.

5. Record Keeping: TPR regards accurate record keeping as being of paramount importance so that simple and efficient reference can be made to past events.

6. Communication: TPR want to see that communication to members is clear and concise throughout the life of the scheme. This communication covers the various stages of a pension, namely joining, investment decisions and converting a member’s pension to an income including the promotion of the Open Market Option.

This is in addition to re-enrolment every 3 years and dealing with opt-outs and opt ins. I expect you are thinking when we are supposed to find the time to do this as well as running a business. You are not alone, TPR has recently published research carried out by OMB in the report “Ongoing Duties Survey-Summer 2018” which highlighted in the report that 12 % of employers found it difficult keeping up with their duties. 27% of these employers had problems keeping up with regulations and 31% finding the time.

In addition, of the employers who worryingly were unaware of all their ongoing duties, specifically the three ‘live’ requirements of keeping records of all automatic enrolment activities, monitoring the ages and earnings of staff to check their eligibility and for enrolling and writing to eligible staff, when these employers were informed of these duties, between 20% to 38% of them were not confident that they could complete each of these duties.

Why is Pension Governance So Important Now?

Well TPR is carrying out spot checks to ensure employers are complying with their pension duties. The checks will help TPR understand whether employers are facing any unnecessary challenges that they can help them with, such as helping them improve their systems but they will also highlight employers who have not taken the required steps to become or remain compliant, paving the way for enforcement action.

Darren Ryder, TPR’s Director of Automatic Enrolment, has said: “The vast majority of employers are continuing to provide their staff with the workplace pensions they are entitled to and are keeping up with contributions after that point. These visits help us to identify why some are not, so we can take action where we need to.

“Automatic enrolment is not an option, it’s the law. If employers are not complying with the law, we will use our powers to make them comply – which could mean the unwanted Christmas present of a fine or even prosecution.”

In 2019, TPR have carried out country-wide inspections that were targeted at employers where TPR data and intelligence teams identified a risk of noncompliance. As a result, 74% of spot checks revealed breaches of pensions legislation, with 76% of these resulting in enforcement action.

The TPR has taken enforcement action against over 4,000 employers failing to carry out their re-enrolment duties in this year alone, resulting in over 800 penalty notices and fines being issued for continued non-compliance.

The key point is Pension Governance can’t be ignored. Every employer needs to have a clear pension governance strategy which demonstrates to the TPR compliance with Auto Enrolment legislation in case of a spot check from the TPR.

We would strongly recommend the Pension Governance process is outsourced to a third party such as Wingate to demonstrate the robustness and independence of the process and continued compliance with TPR regulatory requirements. This could avoid an unexpected fine, backdated contributions and the additional administration involved in remedying any errors. Please contact Wingate if you would like to see how we can assist you with your ongoing pension governance.