Businesses may feel they have had more important things to worry about during the coronavirus crisis than the minutiae of pension legislation, but those who fail to fulfil the requirements of The Pensions Regulator (TPR) do so at their peril.
When talking to prospective new clients, we are finding a particular issue with companies making changes to their pension scheme as a result of the pandemic – often to meet budgetary constraints – without adequately considering these in view of auto-enrolment or HR compliance.
Many such organisations seem totally unaware that there is a requirement for those with over 50 employees to consult with their workforces when making certain pension scheme changes, and that failure to do so can result in fines of up to £5,000 for individuals or of up to £50,000 for organisations.
Indeed, when we explain this, they often start wondering what else their previous adviser has failed to tell them about!
We find the most-commonly-overlooked area where consultation is demanded is when employers are pausing or altering pension contributions. But it is also needed in cases such as when they increase their scheme’s normal pension age, close the scheme only to new entrants, stop future accrual of benefits or require members to contribute where previously they didn’t have to.
Importantly, the requirement still stands even if the change itself has been initiated by another party, such as a trustee or pension scheme manager.
However, there is no need to get too bogged down in the technicalities of when a consultation is and isn’t necessary because an expert adviser like Chase de Vere can ensure that you are kept in the loop about your obligations.
We can also advise on how to actually carry out the consultation, which must involve a period of at least 60 days, detailing the written information you need to issue to affected members and their representatives and helping you consider all responses received upon the conclusion — to decide whether or not to proceed with the proposed change.
Remember also that such a consultation provides an opportunity to further improve awareness of the benefits of pension saving, and our expertise in employee communications makes us ideally placed to add value here.
Furthermore, we may highlight that even in cases affecting employees’ pension rights where there is no statutory obligation to consult, such as when simply switching scheme provider, it could still be good practice to do so.
This may not necessarily have to involve a formal consultation process but it could still be a good opportunity to carry out an engagement exercise and create goodwill. For example, issuing reminders and providing opportunities to ask questions should help to ensure that the change is viewed in a positive light.
Another good reason for involving an expert intermediary is that it will be used to working with the regulator and will know when it might be prepared to give ground. For example, TPR accepts that there can be circumstances where it may not always be practical for a firm to carry out a consultation.
A good example of where it might be prepared to waive or relax consultation requirements would be if a company restructuring is taking place and delaying the process could threaten members’ interests. However, it would still require the employer to provide as much information as possible and as long a time period as possible to implement the change.
We have even found that being open, honest and engaging with the regulator when remedial work is undertaken can result in the removal or reduction of penalties. In our experience, TPR can be sympathetic if it is approached in the right way when genuine mistakes have been made.
In short, any company that has a thorough pensions review with a competent financial adviser will have far less worry about non-compliance in these and other areas.
The Pensions Regulator (TPR) has produced a short guide for employers on the duty to consult, accessible at www.thepensionsregulator.gov.uk/-/media/thepensionsregulator/files/import/pdf/employer-duty-to-consult-on-scheme-changes.
Content correct at the time of writing and is intended for general information only and should not be construed as advice.