From the blog: It's the nightmare scenario: the Pensions Regulator is due to visit and everyone at the company is filled with dread. What's worse, they were right to be concerned.
Following an audit, it came to light that many employees had been wrongly categorised during auto-enrolment. The company in question was non-compliant and at risk of being hit with a very hefty fine. This is a common story.
Following an audit, it came to light that many employees had been wrongly categorised during auto-enrolment. The company in question was non-compliant and at risk of being hit with a very hefty fine.
Dealing with issues as they crop up leaves companies fire-fighting and making mistakes
This is a common story. Because the government gave such short deadlines for auto-enrolment, many schemes were set up in a rush, and there were no previous models of how auto-enrolment should work that companies could follow.
With the regulator now making more spot checks on companies, there is no better time to audit their pension schemes and eradicate any mistakes.
The biggest error the company made did not happen when it implemented auto-enrolment. It was made in the years that followed – when the company let the pension scheme run with only minimal oversight, without anyone ever going back to check whether it was set up correctly or how it was performing.
Its problems could easily have been avoided with one simple measure: regular governance meetings in which key stakeholders review the fundamentals of the scheme.
A good governance meeting should be no different to a regular board meeting or auditing the business finances. Pension schemes must be closely supervised to make sure they are well run. The opposite of this is dealing with issues as they crop up, which leaves companies fire-fighting and making mistakes.
It's not just auto-enrolment mistakes that need to be checked. Pension regulations are constantly changing, so if companies ever believe their schemes are finally fully compliant and can be left alone, they risk being caught out.
Then there is the performance of the scheme. We once reviewed a pension scheme for a client who didn't hold governance meetings and found their existing provider was charging them much more than the market norm.
They were shocked because they had spent a long time making sure they had chosen well. But the provider had not been ripping them off. In fact, it had been a very competitive rate when the scheme was put into place – five years earlier.
With regular governance meetings, this could never have happened, because there would have been a safety mechanism in place to ensure the scheme was regularly reviewed, and that the company was getting value for money.
Of course, any number of problems can bedevil your pension scheme, from a lack of compliance and performance issues to low employee engagement and high numbers of opt-outs.
Governance meetings are the reliable system companies need to catch these issues early – saving your company blushes, money and potential legal trouble. So, if you don't hold pension governance meetings, or don't hold them as often as you should, don't wait any longer.
Steve Butler is the chief executive of consultancy Punter Southall Aspire
