The Personal Accounts Delivery Authority (PADA) is responsible for setting up the new system and for raising awareness of it amongst employers and workers. It will be disbanded in 2012.
It will be replaced by the Personal Accounts Board which will take over the administration of the new system. It will be responsible for how money held in personal accounts is invested.
The Pensions Regulator will be responsible for compliance issues, enforcement and the registration of exempt schemes.
Laying the groundwork for compliance in the new pensions system
The government recognises the new regime needs the buy-in of both employers and individuals to be successful. They intend to use a two-pronged approach to tackle this:
- Employers and individuals need to know how the new personal accounts pensions system will affect them and what they need to do; and
- It must be easy for employers to implement the system.
The government will therefore mount a significant publicity campaign in the run up to 2012, aimed at both employers and workers. It intends to provide easily understood, readily accessible information and help. Amongst other things, it plans to set up a helpline to provide advice to employers and workers. This may double up as a whisteblowing helpline.
Information for employers will focus on helping them to prepare for and comply with their new obligations. Information for workers will seek to persuade individuals of the benefits of staying in a personal account or exempt scheme, as well keep them informed of their rights. This process of education will continue after 2012.
In addition to this, the government recognises that the easier the processes for employers, the more likely they are to comply. It has listened to EEF’s concern that good employers should not be over-burdened with measures designed to prevent avoidance of the legislation. The focus on enforcement will be on helping employers to comply, rather than the early imposition of penalties.
How will the Pensions Regulator enforce the legislation?
Education and good processes must, of course, be accompanied by an enforcement regime with teeth. To ensure a level playing field, you will want to know that your competitors are complying with the legislation. The Pensions Regulator will therefore have powers to investigate and enforce the legislation. The main powers are as follows:
Identifying non-compliance
The Pensions Regulator will be able to match its data with that of the HMRC in order to identify potential non-compliance. It will focus on obtaining high levels of initial compliance.
It will also be able to follow up complaints, whether these are received from individuals, its whistleblowing helpline or from scheme trustees. We hope it will target its attention on employers who are known as ‘bad’ employers, for instance those who are not paying the national minimum wage. It will have powers to investigate, ask questions and enter and search premises.
Dealing with non-compliance
Where it comes to its attention that an employer has not complied with its obligations, for instance it has not auto-enrolled a worker or has failed to pay the correct amount of its own or a worker’s contributions, the Pensions Regulator will be able to issue unpaid contribution notices or compliance notices. These will state what an employer must do, by when, in order to avoid a penalty.
The Pensions Regulator’s initial focus will therefore be on helping employers to correct mistakes. However, if unpaid contribution notices or compliance notices are ignored, it will be able to issue penalty notices which impose a fixed or escalating penalty.
The maximum fine it can impose will be £50,000. Ultimately, non-compliance will be a criminal offence.
What will happen about missed pensions contributions?
The issues involved are different to, say, the national minimum wage, since workers are required to make contributions themselves.
Take, for example, an employer who fails to auto-enrol a worker. Whilst that employer should clearly have to repay its own missed contributions, should it also have to make up the worker’s missed contributions?
A final decision has not yet been made on how missed worker contributions should be treated. However, short periods of missed contributions are likely to be treated differently to longer periods. The approach may be as follows:
Where contributions have been missed for a short period, say three months, the employer will only be obliged to make up its own missed contributions. If contributions are missed for longer, then the employer will have to make up its own missed contributions and the worker’s missed contributions. There will therefore be an incentive for employers to rectify errors promptly.
It is likely that some interest will be payable on missed contributions. The mechanism for calculating this has not been settled.
Will workers be able to bring any claims themselves?
Yes. From day 1 of employment, workers will have a right not to suffer a detriment or to be unfairly dismissed for a reason connected to their membership of a qualifying pension. The way the right is framed will mean that workers - not just employees - will be protected against dismissal for a reason relating to their membership of a qualifying pension. Individuals will be able to complain to an employment tribunal if they feel they feel that these rights have been infringed.
Can you agree with an individual that they will opt out of a qualifying pension scheme?
Any agreement seeking to limit or exclude a worker’s rights under the new regime will be void, including those offering an inducement.
For example, if you were to offer a person a bonus or pay rise if they agreed to opt-out of a qualifying pension scheme, the individual would be able to refuse to opt out and keep any inducement already given.
Will job applicants have any rights?
The government has tabled an amendment to prevent employers from screening out job applicants who wish to join a pension scheme. So, employers will not be able to make statements or ask questions in the recruitment process which indicates that job offers might be dependant on an individual opting out of a qualifying scheme.
If a breach were established, the Pensions Regulator could fine the employer – but the benefit of this fine would not be passed onto the individual.
Individuals will not be able to complain to the employment tribunal that an employer has acted in breach of this provision. Instead, they can complain to TPR.