Starting now, October 2012, ALL employers will have to make compulsory pension provision for their employees
But before you panic, don’t worry. This is being phased in over four years. This process is known as ’staging’
At its simplest, the bigger the company, the earlier the ‘staging’ date.
Employers with more than 50 (fifty) employees in their PAYE scheme as at 1st April (yes, really, it’s not an April Fool!) 2012 will have a staging date between October 2012 and July 2014 with the same rule applying, that the bigger you are, the earlier the date.
Anyone with fewer than fifty employees will have staging date after April 2014 but before February 2016
It is possible to bring forward your staging date if you wish to but only to a set number of dates already listed by The Pensions Regulator (TPR). There is no facility to defer or delay your staging date
The Pensions Regulator has a reasonably clear website: http://www.thepensionsregulator.gov.uk/ if you'd like to read more yourself
As the months roll by, the TPR will be communicating with employers and have promised to do so at least twice in the run up to their staging date.
For all Green Financial clients, I am happy to confirm your date, so you can be prepared in good time, as well as let you know what else, if anything, you need to do.
For me to do this please confirm:
Your PAYE scheme reference number(s) and the size of your PAYE scheme (as above).
Note: If you have more than one PAYE scheme, your staging date will be the one that's earliest.
I can also help clarify any duties you will have under the new rules and contribution levels that will apply
Please contact me if you wish me to help
Ian Green
iangreen@iangreen.com
19th October: I have been asked by a few clients what my fees are for assisting in this area- it will depend on the size of the scheme and the amount of work involved but the first stage(s) are generally just a nominal sum to cover the admin time involved if you don't want to do it yourself
Showing posts with label TPR. Show all posts
Showing posts with label TPR. Show all posts
Friday, 7 October 2011
Tuesday, 25 January 2011
Defined Benefit Pension Transfer Incentives
http://www.thepensionsregulator.gov.uk/guidance/incentive-exercises.aspx
With many occupational defined benefit (often the 'final salary' type) pension schemes looking to close the offering of incentives to members to take their funds elsewhere seems to be growing.
I have consulted with a number of clients who have shown me their 'leaving offer' for a soon to be closed scheme alongside the new scheme details and it has been my opinion that a pension professional, let alone a layperson, is not being provided with sufficient information to make a considered comparison.
Add into the mix an 'incentive', such as a cash payment for leaving and it becomes even harder to make a decision.
The Pensions Regulator (TPR) considers there is evidence that cash incentives distort members' decision-making processes.
In a nutshell, it appears that many schemes offer a transfer value that is enhanced in some way, certainly above the current level of benefit. But once you factor in the reduction in liability in the employer balance sheet, the fact they now don't have to worry about investment performance in the future or the extending longetivity of a workforce, the deal rarely seems to favour the employee or even be fair - it often seems to favour the employer.
From the individuals' perspective, even if the details are fully disclosed, it can be hard to understand the real implications. I've seen schemes where indexation (in layperson terms, the pension goes up each year in line with the price of stuff) is being swapped out for a higher starting pension with much of the 'maths' behind this missing - so all the scheme member focuses on is the higher pension now, not the future pension that reduces in purchasing power as they get older.
Scheme trustees should be the friend of the member here. Their job is to act in the best interests of the scheme members - not help the employer save money.
Scheme trustees who are also senior in the company, or directors, should be very careful they do not face a conflict of interest.
The Pensions Regulator guidance gives 5 principles for employers to follow
- The transfer offer should be fair, clear and not misleading so members can make informed decisions
- The process should be open and transparent so everyone understands the reason for the exercise
- Conflicts of interest should be identified and eliminated or managed transparently
- Scheme Trustees to be involved from the start
- Independent Financial Advice should be available to all members and promoted
Key points (source: http://www.thepensionsregulator.gov.uk/guidance/incentive-exercises.aspx)
- The regulator is concerned that members of pension schemes may be disadvantaged by incentive exercises, particularly if they are not conducted in a manner that makes it most likely members will make a fully informed choice.
- Trustees should start from the presumption that such exercises and transfers are not in most members’ interests, and they should therefore approach any exercise cautiously and actively.
There will be members whose personal circumstances mean it is more likely that they would benefit from accepting such an offer. However, these cases are likely to be in a minority and, very possibly, a small minority. High quality financial advice is key to identifying those members.
- Fully independent financial advice should be made accessible to all members and promoted in the strongest possible terms. In almost all circumstances, the structure of the offer should require that members take financial advice before accepting.
- Employers should ensure that any offers made are consistent with the principles outlined in this guidance.
- Members to whom an offer is being made should be presented with the appropriate information in a way that is clear, fair and not misleading, to enable them to make a decision that is right for them.
- Trustees should engage in the offer process and apply a high level of scrutiny to all incentive exercises to ensure members’ interests are protected. Trustees should ensure that they are comfortable that the selection, remuneration and broader commercial interests of advisers are aligned with members’ interests.
- No pressure of any sort should be placed on members to make a decision to accept the offer.
- The Pensions Ombudsman can investigate complaints made by members about the administration of their pension scheme. When reviewing a complaint the Pensions Ombudsman will take this guidance, as well as other factors, into account in determining whether the employer or trustee is at fault. If the complaint is upheld, the Pensions Ombudsman can direct that compensation be made to the members. The Pensions Ombudsman’s decisions are final and binding on the parties (unless there has been successful appeal on a point of law).
So, perhaps most importantly from the above TPR Key Points:
* Members should not be pressurised into accepting transfer offers
* Members should be given sufficient time to make a decision
* Members should not be given inaccurate or incomplete information
* Members should take Independent Financial Advice
If you are offered a transfer incentive, do all you can make sure you have at least as much information as your employer and consider carefully whether an incentive is really in your best interest.
With many occupational defined benefit (often the 'final salary' type) pension schemes looking to close the offering of incentives to members to take their funds elsewhere seems to be growing.
I have consulted with a number of clients who have shown me their 'leaving offer' for a soon to be closed scheme alongside the new scheme details and it has been my opinion that a pension professional, let alone a layperson, is not being provided with sufficient information to make a considered comparison.
Add into the mix an 'incentive', such as a cash payment for leaving and it becomes even harder to make a decision.
The Pensions Regulator (TPR) considers there is evidence that cash incentives distort members' decision-making processes.
In a nutshell, it appears that many schemes offer a transfer value that is enhanced in some way, certainly above the current level of benefit. But once you factor in the reduction in liability in the employer balance sheet, the fact they now don't have to worry about investment performance in the future or the extending longetivity of a workforce, the deal rarely seems to favour the employee or even be fair - it often seems to favour the employer.
From the individuals' perspective, even if the details are fully disclosed, it can be hard to understand the real implications. I've seen schemes where indexation (in layperson terms, the pension goes up each year in line with the price of stuff) is being swapped out for a higher starting pension with much of the 'maths' behind this missing - so all the scheme member focuses on is the higher pension now, not the future pension that reduces in purchasing power as they get older.
Scheme trustees should be the friend of the member here. Their job is to act in the best interests of the scheme members - not help the employer save money.
Scheme trustees who are also senior in the company, or directors, should be very careful they do not face a conflict of interest.
The Pensions Regulator guidance gives 5 principles for employers to follow
- The transfer offer should be fair, clear and not misleading so members can make informed decisions
- The process should be open and transparent so everyone understands the reason for the exercise
- Conflicts of interest should be identified and eliminated or managed transparently
- Scheme Trustees to be involved from the start
- Independent Financial Advice should be available to all members and promoted
Key points (source: http://www.thepensionsregulator.gov.uk/guidance/incentive-exercises.aspx)
- The regulator is concerned that members of pension schemes may be disadvantaged by incentive exercises, particularly if they are not conducted in a manner that makes it most likely members will make a fully informed choice.
- Trustees should start from the presumption that such exercises and transfers are not in most members’ interests, and they should therefore approach any exercise cautiously and actively.
There will be members whose personal circumstances mean it is more likely that they would benefit from accepting such an offer. However, these cases are likely to be in a minority and, very possibly, a small minority. High quality financial advice is key to identifying those members.
- Fully independent financial advice should be made accessible to all members and promoted in the strongest possible terms. In almost all circumstances, the structure of the offer should require that members take financial advice before accepting.
- Employers should ensure that any offers made are consistent with the principles outlined in this guidance.
- Members to whom an offer is being made should be presented with the appropriate information in a way that is clear, fair and not misleading, to enable them to make a decision that is right for them.
- Trustees should engage in the offer process and apply a high level of scrutiny to all incentive exercises to ensure members’ interests are protected. Trustees should ensure that they are comfortable that the selection, remuneration and broader commercial interests of advisers are aligned with members’ interests.
- No pressure of any sort should be placed on members to make a decision to accept the offer.
- The Pensions Ombudsman can investigate complaints made by members about the administration of their pension scheme. When reviewing a complaint the Pensions Ombudsman will take this guidance, as well as other factors, into account in determining whether the employer or trustee is at fault. If the complaint is upheld, the Pensions Ombudsman can direct that compensation be made to the members. The Pensions Ombudsman’s decisions are final and binding on the parties (unless there has been successful appeal on a point of law).
So, perhaps most importantly from the above TPR Key Points:
* Members should not be pressurised into accepting transfer offers
* Members should be given sufficient time to make a decision
* Members should not be given inaccurate or incomplete information
* Members should take Independent Financial Advice
If you are offered a transfer incentive, do all you can make sure you have at least as much information as your employer and consider carefully whether an incentive is really in your best interest.
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