12 June 2013
In September 2012, the Pensions Regulator held a three month consultation on revising their codes of practice on reporting late payments of contributions to defined contribution schemes.
The consultation results have been analysed and amended draft codes of practice have now been laid before Parliament – with an expectation that these codes will go live in the Autumn.
Why is this important? It is clear that the correct identification and payment of contributions is vital to the beneficiaries of a DC scheme. Timeliness is also key: if payments are delayed then there will be a need to reinstate beneficiaries to the position that they would have been in had this not occurred; moving investment markets may mean that the cost of this repair could rapidly increase if the problem is not rectified quickly.
The Regulator has restated their view of legislation: that schemes have a legal obligation not just to monitor the inflow of payments, but to put in place processes based on an understanding of the payments that should be made (in other words, to be able to conduct a full reconciliation of under-and over-payments).
Whilst scheme members should have a clear understanding as to their contribution entitlements and the employer retains the primary responsibility to make these payments, trustees of occupational pension schemes do have a fiduciary responsibility to chase payment irregularities and will need to escalate long-overdue and/or material deficiencies to the Regulator.
The full results of the consultation, new draft codes of practice and the original consultation paper can all be downloaded from the Pensions Regulator website.
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Author: Martin Veasey.