Advisers should ‘scare’ their clients into ensuring pension scheme compliance or risk fines or schemes being merged, a pension expert has warned.
Sue Beaumont, pensions consultant at Linder Myers solicitors, told Money Management in a video interview that employers must not ignore potential sanctions.
“It’s up to IFAs to scare their clients into their best interests so they realise this is real and it’s going to happen if they don’t comply now,” she said.
For both auto-enrolment pensions and other schemes, she said, the regulator is watching to ensure schemes are compliant and fines of up to £5,000 per day could be levied.
“For a smaller employer, £5,000 a day could break the books,” she said.
A legacy of complacency developed following stakeholder pensions, she added, where no sanctions were imposed.
“A lot of employers didn’t do anything about stakeholder and nothing happened to them, there was no real big scandal, there were no real big fines or anything like that.”
Ms Beaumont said that we now have a much stronger regulator but that four out of five pension schemes are non-compliant. Advisers should be looking at what the regular calls ‘sub-scale schemes’, she added, and educating themselves on their client’s behalf to make sure they are compliant.
“With auto-enrolment coming in, it’s going to be really critical for advisers.
“In Australia, the regulator has the power to merge schemes. This is where SMEs should really be worried and IFAs should be looking at their schemes because do they want their schemes to be merged? It seems ridiculous but the regulator wants fewer bigger schemes because it’s easier for them to regulate.
“Whether it’s best advice for your client to go along that route or whether they should be looking at their schemes and saying ‘what should we do?’, I think the time is now to look at those issues and make sure that you don’t fall foul of any of the breaches.”
To watch the full interview, click here.