Personal accounts trustee could see new powers

26 October 2009 3:25 pm | By Helen Pow

In a summary of responses to a consultation on the draft scheme order and rules, the Department for Work and Pensions and the Personal Accounts Delivery Authority propose a “broad power” to allow the trustee to recover additional administration costs from employers.

The document states: “Employers who persistently fail to meet the terms and conditions are likely to create additional costs for the scheme.

“Any costs of the scheme must be borne by all members. We believe it is important that all members are not adversely affected by the potential actions of a minority of employers.

“To address this we propose to include a broad power in the scheme order to allow the trustee to decide on the desirability of recovering additional administration costs, the calculation of the additional costs, and the method of recovery.”

The DWP and Pada suggest the trustee may consider exercising this power where an employer persistently provides incorrect information resulting in additional costs.

Hargreaves Lansdown pensions analyst Laith Khalaf says: “This sounds like the trustee will have to do a policing and magistrating job as well. Normally that would be down to the Pensions Regulator.

“If an employer is naughty, the trustee has a duty to flag it up but this seems to be saying trustees will be able to enforce additional payments from employers.”

Standard Life head of pensions research John Lawson says: “I do not think they could enforce this sort of provision.

“What amounts to additional work for administrators/trustees? Where will that additional work be defined/itemised? How will the additional charge be calculated? How do you measure the hassle factor?

“The idea of charging employers who fail to supply the correct information is daft. If we charged employers every time they messed-up, we would have no customers left.

“You just have to accept that people make mistakes and that you have good processes in place to resolve those.”

The paper also confirms that personal accounts scheme members’ lump sum death benefits could be subject to inheritance tax stating: “Operating trustee discretion in respect of each and every occurrence of a member’s death would not be possible because of the potential membership size of the scheme.

“It will be important to ensure that all relevant communications to members stress that pension benefits could be subject to inheritance tax and the importance of keeping nomination forms up to date.”

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