Cambridgeshire fund tightens payment reporting ahead of regulatory changes

From April 1 next year, public sector schemes will need to report all late contribution payments to the Pensions Regulator, which is concerned about the potential "detriment to members" caused by delays.

The £1.6bn scheme now requires Cambridgeshire County Council – its largest participating employer – to submit a PEN18 form each month, which details the employer and employee contributions payable.  

Malcolm Gardiner, pension fund accountant at LGSS Pension Services, which administers the Cambridgeshire and Northamptonshire schemes, said the requirement is part of a wider review of its processes for collecting mandatory contributions, as well as in preparation for new reporting requirements.

“We want every employer that has members in the pension scheme to submit a PEN18 each month,” he said. 

Gardiner added the scheme is also looking at speeding up the collection of contributions, a move which is slated for the next few months.

Under the regulator’s draft code of practice for the governance and administration of public service funds, those schemes will need to ensure they have processes in place to monitor contributions, resolve payment issues and report payment failures to the regulator.

The government found the regulations should focus on the essential pieces of information that schemes need to hold about members and the pension arrangements they are administering and it would be appropriate to amend the regulations to include amounts owed to the scheme that are written-off, as these represent potential or actual losses to schemes which are not captured elsewhere in the regulations.

The new duties have been brought in by the Department for Work and Pensions under the Public Service Pensions (Record Keeping and Miscellaneous Amendments) Regulations 2014, with a consultation response issued in July.

The regulator states in its draft regulatory strategy for public service pensions that it will pursue an "educate and enable" approach, however it may turn to enforcement when necessary and proportionate to do so, such as where there is sufficient evidence of a breach.

A spokesperson for the regulator said: “Essentially late payment can be to the detriment of members. There’s an objective on trustees and managers of private sector schemes to report late payments to the regulator and we already enforce this. So what is happening is the government has decided to extend this objective to public service schemes.”

John Reeve, senior consultant at administrator Premier, said the issue for public sector schemes is payment information coming in from many different sources.

“You might have a situation where the pension manager and the HR manager know a payment system is due and have triggered it, but it’s gone into the treasury function,” Reeve said.

This means it is important for schemes to establish clear, documented lines of responsibility for checking and chasing payments, he said.

“We would always advise companies that they need to pay five days before the deadline so you’re not up against the deadline,” he added.

Kim Gubler, director of Kim Gubler Consulting, said when this requirement was brought in it was difficult for some schemes, particularly multi-employer plans, to establish the internal processes to monitor payments.

“It’s bringing in adequate processes so that they measure when the contributions should be received and how they should be received,” she said. “Say they’re coming by bank transfer or by direct debit, the best way to do it is to have a direct debit trigger.”