Is your group pension scheme fit for purpose?
Since the automatic enrolment regulations were introduced in 2012 more than 10.2 million workers have been enrolled into workplace pension schemes.
Employers are aware of their administrative duties, but The Pension Regulator’s six key principles mean employers’ duties go beyond simply having a scheme and completing the day to day administration.
In brief, The Pension Regulators six principles are: –
- Essential Characteristics – schemes are designed to be durable, fair and deliver good outcomes for members.
- Establishing Governance – a comprehensive governance framework is established at set up, with clear accountabilities and responsibilities are agreed and made transparent.
- People – those who are accountable for scheme decisions and activity understand their duties and are fit and proper to carry them out.
- Ongoing Governance and Monitoring – schemes benefit from effective governance and monitoring through their lifecycle.
- Administration – schemes are well administered with timely, accurate and comprehensive processes and records.
- Communication to Members – communications to members are designed and delivered to ensure members are able to make informed decisions about their retirement savings.
Arguably, the key to these principles is to deliver ‘good outcomes’ for employees. With more than 90% of those enrolled in the UK staying in their workplace scheme it does mean that there will be an improvement for many in their quality of life when they draw on their pension pots in retirement.
Despite the significant increase in long term retirement saving in the UK, however, the principle of ‘ongoing governance and monitoring’ highlights the need for constant review.
Although ‘ongoing governance’ is not a legal requirement failure to maintain an automatic enrolment scheme that suitably benefits its members could potentially result in action being taken against an employer – either by the employees or The Pension Regulator.
If asked by one of your employees, or even The Pension Regulator’s compliance team, for details on when, how and who has last reviewed your workplace pension scheme, are you able to answer this question and provide suitable evidence?
Depending on when you originally had to comply with the automatic enrolment rules, which were rolled out from October 2012 onwards, you need to decide when you should be reviewing your pension scheme and who would be ‘fit and proper’ to carry out the review.
If you would like to discuss reviewing your pension scheme then please contact me.
Senior Financial Planning Consultant