How draft contribution rules impact your scheme

Last September, the regulator published a consultation on updating codes of practice around ensuring members receive the correct scheme contributions under auto-enrolment, as part of an effort to standardise reporting processes.

In documents published today on the reporting of late payments, the watchdog has outlined a key role for trustees and providers in helping to oversee the payment of contributions. Subject to approval, the codes will come into force in September.  

While the primary responsibility for deducting the right amount of money sits with the employer, trustees and providers will be expected to closely monitor the process.

“Trustees and providers have an important role here," said Charles Counsell, executive director for auto-enrolment at the regulator. "It has got to be right because those two organisations, the employer and the provider or trustee, are the closest to the transactions.

“So, it is really important that they monitor the contributions that are coming to make sure the right contributions are coming in at the right time.”

Will Aitken, senior consultant at Towers Watson, said the new codes could be a burden for trustees and providers, adding that the new regime could be financially draining in terms of schemes' administration costs.

“For mastertrusts, the position is even worse. Where contributions are late, the trustee has to chase the employer, many of whom may be unwilling participants and most of whom the trustee will have little or no knowledge of,” he said.

The reporting process

An online reporting system will be launched by the regulator in 2014 that will allow employers to submit a standard content and format for reporting. It is hoped that this will help the watchdog enforce more effectively.

Schemes and providers will be expected to start using the system by March 2015, with any necessary software adjustments made ahead of this date. It has said the monitoring process should be “risk-based” and “proportionate”.

Counsell rebuffed criticism that adjusting software would be too much of a financial burden on schemes and providers, adding that any investment would be cost-effective in the medium term.

The regulator has stated that employers have the main duty to ensure the right contributions are maintained, but said it wanted to put in place a balance of responsibilities that also includes efforts from schemes and providers.

Simon Tyler, legal director at Pinsent Masons, said trustees and schemes may find it less of a challenge to implement new ways of working than providers of personal pension schemes.

“Trustees of occupational pension schemes will also have to implement new processes, but since they work more closely with the employers, it may prove easier for them,” he said

Francois Barker, head of pensions at Eversheds, said trustees and providers have been asking for clarity on what is expected of them.

"Whilst the code provides some practical guidance on what trustees and providers could do, it still leaves uncertainty about the precise scope of their obligations,” he said.