The Department for Work and Pensions has ditched “unworkable” reforms that could have forced large trust-based pension schemes such as Nest to carry out expensive and time-consuming audit checks.
Occupational pension schemes are required by law to appoint an auditor. There are, however, restrictions on who can be an auditor for an occupational scheme – including strict independence requirements.
Nest, the pension scheme set up by Government, had raised concerns about its ability to appoint an auditor that met these requirements because of its size.
In response, the DWP proposed to introduce an exemption from the independence requirements for trust-based, multi-employer schemes where:
- at least two-thirds of the employers are not associated or connected, and;
- there are at least 500 participating employers in the scheme.
However most respondents to the consultation warned the first exemption requirement was unworkable and, as a result, the DWP has scrapped it.
The DWP says: “Most respondents commented the criterion that at least two-thirds of the employers should not be associated or connected would be unworkable for schemes as they would be required to gather information that they are not empowered to collect.
“Respondents also stated the definitions of ‘associated’ and ‘connected’, which are taken from the Insolvency Act 1986 and Bankruptcy (Scotland) Act 1985, are very broad and would capture connections between relatives, including distant relatives, which in the vast majority of cases the Government would not consider to be materially significant connections for scheme audit purposes.
“In practice this could require schemes to check hundreds, and in some cases thousands, of connections between employers in order to determine whether they were eligible for the exemption.”
The exemption for multi-employer trust-based schemes with at least 500 participating employers will be introduced in April.