Providers have criticised proposals from The Pensions Regulator designed to strengthen their role in policing employer contributions under automatic enrolment.
Last week, the regulator published a consultation outlining how it wants employer pension contributions to be monitored under auto-enrolment.
It proposes forcing providers to check the way employers calculate member contributions to make sure they are receiving the right amount of pension.
Speaking to Money Marketing, The Pensions Regulator executive director for employer compliance Charles Counsell says: “Automatic enrolment only works if the contributions that are meant to go into a pension scheme are maintained over the long term.
“So we want to provide more clarity about how that will work. The employers with staging dates in the next 12 months are familiar with pensions and making contributions and are likely to make sure they run correctly, so this is aimed at small and medium sized companies which are less familiar.
“We are setting out clearly the responsibility of the scheme, the employer and the employee. It has to be right that the member should expect the scheme to look at the contributions that are going in, check they are right and if they are not the scheme and the employer should sort that out.
“What we are looking for is wilful breaches of duties, so we want the scheme providers to tell us when employers are wilfully not paying the right amount. That is when we will take action.”
Pension providers say the requirement to monitor contributions is an extension of their current duties and will result in costly system changes.
Legal & General pensions strategy director Adrian Boulding says: “At the moment we take what the employer gives us in contributions and we bank it. We do not go back and undertake checks as to how it is calculated, which is what The Pensions Regulator wants us to do.
“It is frustrating that, so close to the launch of auto-enrolment, we are now being asked to make extensive and potentially expensive system changes.”
Aegon regulatory strategy manager Kate Smith says: “This is another increase in the workload we are expected to undertake. There is a reliance on the employer providing us with the correct information, which is not always the case at the moment.
“If we do not get the right information, it will be difficult for us to monitor contributions accurately.”
Association of British Insurers director of life, savings and protection Stephen Gay says: “We have been discussing the issue of maintaining contributions with the regulator for a number of months.
“Providers have a duty to check that the expected contributions are made on time but it would be unrealistic to expect that they could monitor the application of internal agreements between employer and employee and we believe this is outside the current framework of workplace pension rules.”
Radcliffe & Newlands chartered financial planner Mel Kenny says: “The increased costs of doing this will inevitably filter down to members.
“Self-regulation of contributions with the threat of a fine should be considered in the first instance.”