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.

The Office for National Statistics (ONS) released its annual survey of occupational pension schemes in June 2019 and this identified some interesting trends in relation to Workplace Pensions. One of the key statistics that instantly jumped out at me, was a surge in the number of dormant pensions in recent years.

Since auto enrolment was introduced, the number of active members (i.e. those contributing to a private sector pension) has more than doubled from 7.8 million in 2012 to 17.3 million in 2018. This is good news and an indication of how successful the government’s pension reforms have been; however, it also poses a problem in that it has created an increase in small dormant pension pots as people move jobs, which happens far more often than previous generations, and with each new job comes a new pension. But what are people doing with their previous pension funds? For many, it appears the answer is nothing!

To be more specific, the ONS Survey showed there were 18 million dormant pensions in 2018, up from 15.8 million in 2017 – these being ‘old’ workplace pensions to which contributions have ceased. The increasing number of small pension pots is making it harder for millions of savers to manage their money and understand what they will receive when they get to retirement; meaning a vast number of people may be set for disappointment when they do.

It’s concerning that, according to estimates by the Department for Work and Pensions, up to 50 million pension pots will be lost by 2050 without a vehicle to help workers keep track of savings through their careers. Although insurance providers make considerable efforts and spend millions every year trying to reunite people with lost or forgotten pensions, providers are unable to keep pace with a mobile workforce that moves jobs and homes more often than ever before.

This illustrates a need for the Pension’s Dashboard more than ever (something highlighted by my colleague Richard Grover in his opinion piece in April 2019) enabling people to see all their pension savings, including the State Pension, together in a single online area. Until that time, it makes sense for savers to be more proactive when it comes to their pensions. Some clear guidance to an employee from a qualified professional may mean the difference between that person understanding the value of their ‘old’ pension in the context of their overall pension picture and possibly transferring this into their new plan, or them potentially losing track of it completely.

At Wingate we have designed a pension engagement service for employers to try and de-jargonise pensions for employees, with a view to getting staff engaged with pensions and planning their futures. If you are looking to understand how pension education can help increase employee appreciation of your pension arrangement, then please feel free to contact us at:

@: info@wingatebs.com  or   t: 01883 332260

In February 2018 I wrote a blog
‘Pension Dashboard – Mind the Elephant in the Room’ when it seemed at the time like the dashboard would be only a heart beat away.

To recap, the purpose of the dashboard was to allow the consumer to see the value of all pensions related to them in one central and easy to navigate system.

The original plan was for the dashboard to be delivered in 2019 and things could still be on track to meet this deadline however it’s not all been plain sailing.

A consultation was recently announced and the Department for Work and Pensions (DWP) has now published its response which sets out its proposal to get this idea ready for consumers which will ultimately give them more information around their pensions and potential retirement incomes either on a desktop, tablets of mobile phone app.

Details released by the DWP include:

  • A commitment for legislation which compels ALL pension providers to make data available through the dashboard
  • An expectation that the majority of schemes will be ready to ‘go live’ within a three to four-year window
  • Confirmation that details of the state pension will be included on the dashboard, sooner rather than later

The Work and Pensions Secretary, Amber Rudd, has confirmed that she is scheduled to see the first industry dashboards later this year.

Although the dashboard is still a good idea, my view on the dashboard still hasn’t changed from last year. Is the drive to accrue such data a precursor to a radical change to the State Pension?

We all know that there is a pension crisis looming and the Government have already taken some very constructive steps to try and address this issue by introducing automatic enrolment, pushing back state pension ages and from 2028, are changing the date when private pensions can be accessed (10 years before someone’s state pension age) but more still needs to be done.

Will the government use the data contained within the pensions dashboard to review what the average UK’s individuals’ pensions wealth looks like? Will the great concept of the pension’s dashboard be the very stick that the government choose to beat us with?

Could this information be used to start means testing State Pensions at some point in the future? Surely any change to the state pension will mean an overhaul in the UK tax and NI system too.

As stated in my previous blog, any change to the state pension could well be political suicide however it could be said that this is already happening with the current political fiasco around Brexit.

Richard is one of our Strategic Employee Benefit Consultants and can be contacted on 01883 332260 or at richard.grover@wingatebs.com

It feels like Brexit has been going on far longer than the two and a half years since the original vote, but is something that we, as pension advisers, are talking about more than ever. Why? Because when we meet with individuals, many of them – both UK and EU Nationals – ask us the same question: How will Brexit affect my Pension?

There’s no doubt that Brexit has affected the pension market, but pensions have changed in other ways in recent years and whilst it’s important for pension savers to ensure they retire in the strongest position possible, there will always be areas beyond all of our control. In my opinion, the biggest impact of Brexit on Workplace Pensions is unlikely to be any changes to the rules currently in place, but more on the investment return of pension funds. This is linked to the performance of the UK and EU economies – as well as the economic performance of the rest of the world – and investment return impacts on the value of your Workplace Pension. Pension funds performance is directly linked to the UK economy, as a large proportion are invested here through UK equity holdings or UK bonds.

As reported by Moneyfacts*, pension funds had a strong year in 2016 and the year-on-year performance was the highest since 2009. Brexit was at the heart of that, with stock markets benefitting from the falling value of sterling, which subsequently encouraged foreign investment to the UK.  This drove the FTSE 100 to hit new record highs, which was good news for pension savers, as this improved performance resulted in higher pension pots for retirement.

However, growth slowed in 2017 and then in 2018, we saw the first year-on-year loss for many pension funds since 2011. It might be unfair to place the blame for this solely on the shoulders of Brexit, but the existing uncertainly and potential risk of a ‘No Deal’ has certainly influenced market behaviours. When Brexit finally comes around, whatever impact it has on the economy – positive or negative – will have a significant influence on Workplace Pensions.  We should also bear in mind that the nowadays-rare Defined Benefit pensions, offering a guaranteed income to pensioners on retirement, are still paid from funds invested in the markets meaning a severe negative downturn could finish these off for good.

The possible impact of Brexit on UK state pensions, where the big determinant is the size of the current tax base used to pay state pensions currently in payment, is a little more straightforward. Whilst these are dependent on the economic state of the UK, tax and national insurance funding this, the population’s size and age are both key – which is related to future levels of immigration to the UK. This was considered to be the single biggest driving force behind the vote to leave the EU, but post Brexit migration legislation is very important as we NEED increased workers in the UK to fund state pensions for our aging population.

Therefore, although we can look at the potential impacts on pensions, it’s possible that the two biggest Brexit unknowns – the impact on the economy and immigration – are the most important factors. In terms of what will have the biggest impact on how much people have as a pension, these are both likely to dominate any implications that arise as a result of future changes made to pension rules.

We will continue to monitor the investment performance of Workplace Pension funds very closely so if you would like any further information, please get in touch.

*https://moneyfacts.co.uk/news/pensions/2016-saw-highest-pension-fund-returns-since-2009/

In a recent update published by The Pensions Regulator (TPR), they confirm that between April and June 2018 27,219 compliance notices were issued against employers for breaching automatic enrolment rules. Let that sink in for a moment…27,219 compliance notices in a 3-month period!

A compliance notice is issued by TPR to set out the steps an employer must take (or refrain from taking) in order to remedy a breach in automatic enrolment processes, but also to prevent the breach from being repeated. A compliance notice is normally issued following an inspection where the TPR visit an employer’s premises to in effect audit their automatic enrolment processes. If following an inspection a compliance notice is not adhered to then TPR do have the ability to issue monetary penalties to employers too.

This all sounds pretty serious and when you dig deeper into the financial penalties and possible reputational damage that non-compliance around automatic enrolment can cause to an employer, then it is it very, very serious indeed.

Typically, during an inspection, TPR ask to see evidence of four things:

*They will need to see a breakdown of your workers and the categories they fall into for Automatic Enrolment. In effect, TPR want to see your payroll software.

*They may need to take away copies of payroll printouts/records. This could be your payroll going all the way back to your staging date. They will need to see names, dates of birth, national insurance numbers, gross earnings and pensions deduction from pay in relation to your workers.

*They will need to see details of the Pension scheme(s) that you are using for Automatic Enrolment purposes including the scheme name and any specific reference numbers that the provider has given to you.

*They may need to determine what letters/e-mails were sent to your workers about Automatic Enrolment and how many of your workers OPTED IN or OPTED out.

 

An audit tends to take a couple of hours to complete and TPR have the authority to talk to ANY person on the premises in conducting their inspection. Like any type of audit, a TPR inspection would generally be a bit of a nuisance as it would disrupt your working week. However, if you have everything in order and are happy to provide the information required then why be worried?

 

*As an employer, are you comfortable in being able to provide TPR the evidence listed above?

*As an employer, are you comfortable that you would pass a TPR audit is you received an inspection notice through the post today?

*As an employer, do you know where to go to get help and advice from qualified professionals to make sure that all your ducks are in a row, should the inspectors come calling?

 

If you would like a free independent initial assessment of your Automatic Enrolment compliance position, please contact us on 01883 332260.