Regulator tells bosses to keep quiet on pension opt down

twitter-iconfacebook-iconlinkedin-iconmail-iconprint-icon
Search supported by
Regulator tells bosses to keep quiet on pension opt down

The Pensions Regulator has said employers should not tell their staff that they can potentially reduce their minimum contribution rates when rate rises kick in next month.

Some employees will be given the chance to contribute less than the minimum 5 per cent, of which the employer must pay at least 2 per cent, after new the rates are implemented on 6 April.

An option to contribute less does exist, but will only be available on select schemes and may mean the saver will lose the contribution paid by their employer.

Bex Woodley, industry liaison manager at the TPR, said while it was important for employers to improve their client communication when rates go up to ensure people understand the value of their pension and do not opt out, she warned against informing them of this option.

Speaking at an event organised by the Transparency Taskforce in London yesterday (8 February), she said: “We’ve said write to members and let them know the rate changes are happening.

"But it’s absolutely not a statutory requirement that you have to [do that].

“People should be incredibly wary about [telling their staff about lowering their contribution rates] because it could be seen that the sole or main purpose [of doing so] is to induce them to reduce their contributions. 

“As indeed, if they reduce their contribution to below the minimum legal requirement, there is a possibility at that point the employer would not pay theirs.

“Our suggestion [would be] when the member joined they would have received a pension pack and in that pack there would have been a line that said they would have the right to reduce their contributions. 

“So perhaps, if there is the possibility of doing so, maybe mention it when you get their opt out papers.”

The move will also render the pension non-qualifying, meaning the member will be re-assessed at re-enrolment.

Meanwhile, it is still unclear how the success of auto-enrolment can be measured.

Asked whether opt down rates would be treated as opt-outs for statistical purposes she said she did not think that would be possible.

While TPR does not collect the data, the Department for Work and Pensions does, she agreed with Henry Tapper, founder of the Pension Playpen who was in the audience, that measuring success based on the number of people auto-enroled might not work.

A better way to measure success would be to look at the amount of money put into pension schemes through auto-enrolment, Mr Tapper said.

There has been concern in the industry that cessation rates, where people have not opted out but stopped paying rates at one point, have not been adequately captured by the government, and numbers could match those of opt outs, which would skew success rates.

So far more than 9 million people have been auto enrolled by 1 million employers, with 545,000 people already approaching re-enrolment through 37,000 employers.

Meanwhile, TPR has served 79,879 compliance notices to employers for failing in their auto-enrolment duties by 31 December, resulting in 32,211 fixed penalty notices and 6,770 escalating penalty notices (EPN). 

Not completing the declaration process properly is a common cause of fines, Ms Woodley said.

Those who fail to pay their EPN are subject to a court order.

Latest firms taken to court over auto-enrolment were bus company Stott Tours and Crest Healthcare.

carmen.reichman@ft.com