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Now: Pensions slaps fine on employers using BACS

Employers using Now: Pensions for auto-enrolment could be slapped with fines if they use BACS transfers to make pension contributions.

Yesterday, Money Marketing revealed how members and employers are due to suffer a Christmas ‘blackout’ as the scheme switches administration providers.

As part of its migration to the new admin provider – JLT Employee Benefits – the provider is asking employers to set up direct debits for pensions contributions. Employers who continue to use BACS transfers will have to pay £75 plus VAT per payment to cover “additional administrative steps”.

Employers who joined the scheme after January 2014 already make contributions using direct debits and will not be affected.

Advisers say other providers don’t levy a charge for using BACS and warn employers making weekly contributions could see fees stack up.

LEBC divisional director of group savings & investments Glynn Jones says the extra cost could hit £4,000 a year, although Now: Pensions insists it would not allow this to happen.

He says: “That’s quite a lot of money. Obviously by getting JLT involved they’re having to move to direct debit. It’s quite an added expense especially if you’re a weekly payer.”

Syndaxi Chartered Financial Planners managing director Rob Reid says he is not aware of any other providers charging employers in this way.

Standard Life confirmed it does not charge if employers use BACS when making contributions.

A Now: Pensions spokeswoman says only a “minority” of employers who cannot pay via direct debit will be affected and they will be given a grace period before the charge kicks in.

She says: “Our preferred method of payment going forward, in common with many other auto enrolment providers, is direct debit. This is clearly the most efficient method of payment for large scale pension contribution processing.

“Some of our clients have historically paid across pension contributions by BACS. Following the move to our new administration provider, these clients may wish to continue doing so for a period of time whilst we discuss the benefits of a move to direct debit and what that may mean for their own business.

“Following the migration we will therefore not immediately charge our clients for a continuation of the use of BACS. These are conversations that we will have with each of our clients in due course.”

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Comments

There are 4 comments at the moment, we would love to hear your opinion too.

  1. Holy moley! and I thought banks were ripping us off charging £30 for a CHAPS (TT) transfer. Nice work, if you can get it.

  2. I think the size of the fee is not designed to rip people off but focus their minds into using DD which is of course, free.

  3. @Phil Sipocz

    DD means that others control your bank account. I have zero DD and never had any. and I don’t blame forms for not having them either. You can set up regular payments via internet banking and you are always in control.

    I would sincerely hope that the firms would move to another provide and adviser.

  4. @Harry – Direct debit on demand IS controlled by the employer, you key in the members and amount to be claimed by DD and it happens. We have done this for our employers for over a decade and it is better than BACs for reconciliation etc I wish ALL our group schemes were DD on demand rather than BACs.
    As to the penalty, the BENEFITS of DD on demand just needs to be explained to the employer properly BEFORE any suggestion of extra admin costs for BACs.

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