Employers level down to avoid more costly LGPS

Naomi Cooke, national pensions officer at GMB, said some employers had not enrolled in the LGPS, and tried to launch their own “low-level” schemes instead in an effort to save money.

She warned that this kind of disregard for the “spirit of the regulations”, coupled with a lack of enforcement by the Pensions Regulator, could jeopardise the success of auto-enrolment, which large employers will be rolling out from next month.

“You’ve got some organisations, who we think should be auto-enrolling into the LGPS, who are trying to set up their own low-level auto-enrolment bare-minimum alternative and enrol people into that instead of where we think they should be auto-enrolled,” she said.

“So there are issues starting to emerge where some employers are trying to limit their cost exposure.”

Throughout her discussions with the Department for Work and Pensions about the launch of auto-enrolment, Cooke said the enforcement aspect of the scheme had never been fully addressed.

The regulator, which will have responsibility for monitoring and enforcing the scheme, does not have the resources to fully police auto-enrolment, she argued.

“What will end up happening is that the only times things will be picked up is going to be where members are clued up enough to know what their employers should be doing, and report [any wrongdoing].”

She added: “It’s more likely to be us that finds out about it than the regulator, which is barely on the look-out.”

Tom Barton, senior associate at Pinsent Masons, said he was unaware of any loopholes that employers could exploit, but acknowledged that firms could just choose minimum compliance if they wished to.

“Auto-enrolment applies across the board and doesn’t cut across benefit entitlement that people might have already. All it’s doing is increasing the amount of workers in a pension scheme,” he said.

“In an ideal world employers would choose to deliver auto-enrolment through very generous pension schemes, but if there’s no strict obligation on them to do that, you could say, ‘Such is life.’”