The Pensions Regulator has proposed a significant strengthening of the role of providers and trustees in policing employer contributions under automatic enrolment.
The regulator has published a consultation today 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.
The consultation says: “As part of their monitoring activities, the regulator considers that those running schemes should seek to establish the reasons and circumstances that give rise to a contribution that falls to be paid not being paid in full on time.
“This will allow trustees and providers to identify and correct any administrative errors that arise and restrict reporting to the regulator to material payment failures, including wilful and deliberate non-payment by an employer.
“We expect employers to provide this information to enable trustees and providers to effectively monitor. In any event, trustees and providers have the power under pension legislation to request the necessary information from employers.”
Legal & General pensions strategy director Adrian Boulding (pictured) 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: “These proposals rely 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.”