The Pensions Regulator has published a draft code of practice setting out the role of providers in policing automatic enrolment pension contributions.
In September, TPR issued 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.
A draft code, published today, requires providers to put in place “risk-based processes” to check whether employers are paying pension contributions when they should be.
The regulator says in order to do this, providers will need to obtain information on contributions due to be paid by the employer and on behalf of the member, the pensionable pay that contributions are paid upon, and the due date for payment of contributions.
In March, Money Marketing revealed industry concern that this approach will force providers to abandon smaller employers who are considered more likely to make contribution mistakes.
Speaking to Money Marketing, TPR executive director of automatic enrolment Charles Counsell says: “Auto-enrolment is a game changer in terms of how pensions will work.
“What we want to do is shine a very bright spotlight on ongoing duties and in particular the duty to maintain contributions. It is absolutely critical to auto-enrolment’s success that the employer continues to pay money into the scheme.
“But it cannot be right that an employee of a smaller company would get a lower level of protection than an employee of a larger employer, so it has to be right that this process gives all members the same level of protection.
“This goes hand in hand with the quality requirements we are looking to put in place for DC schemes. Ultimately if you are running a pension scheme and you cannot monitor contributions properly that is unacceptable.”
The regulator says it is developing an online tool which will allow providers to report contribution payment failures.
Aegon says the new code, if implemented, will see providers place greater scrutiny on legacy schemes.
Regulatory strategy manager Kate Smith says: “Older schemes with manual processes or which have exhibited issues in the past must now be subject to closer scrutiny by providers.
“Some employers may already be considering upgrading to new technologies and The Pensions Regulator’s requirements are likely to prompt more to do so. Advisers are well-placed to help employers on this journey.”