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Pensions regulator’s policing contributions stance could hit small firms

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The Pensions Regulator is refusing to budge from its controversial stance on policing automatic enrolment contributions, with some in the industry raising concerns its approach will force providers to abandon small employers.

In September, TPR published a consultation which proposed forcing providers to check the way employers calculate member contributions to make sure they are correct.

Pension providers hit back, warning the regulator’s stance would be expensive to implement. The Association of British Insurers suggested checking the application of agreements between employers and employees is outside the current framework of workplace pension rules.

In a briefing document issued to industry stakeholders this month, seen by Money Marketing, TPR holds firm over its proposals but moves to dampen fears providers will be required to check all pension payments. The regulator says it is only seeking “reasonable assurance” that “effective internal controls” are in place.

It says providers can satisfy this requirement by introducing a “risk-based” monitoring system which will allow them to identify where “material payment failures” are likely to occur.

A source says this will force providers to segment the market in order to identify employers least likely to comply with TPR’s rules.

The source says: “The danger with a risk-based solution is providers will not want to touch employers where the risk is greatest. Risk is greatest in smaller employers and if the cost of servicing small employers goes up, providers will not want to help them.”

The Pensions Regulator says: “Employees are entitled to the same level of protection however large their employer organisation is and The Pensions Regulator wants to ensure standards of service are in place that help all members get the contributions they are due.

“It has always been our intention that trustees and managers should take a risk-based approach to their duty to monitor contributions due to the scheme for the purpose of identifying material payment failures. We recognise that the process must be commercially viable for the scheme.

“The approach we have set out provides flexibility and we are working closely with stakeholders – a number of whom already operate viable risk-based monitoring processes – as we finalise the codes and guidance.”

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