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Pensions – auto-enrolment contributions edge upwards

We are now seven weeks from the first hike in the “minimum” requirements for auto-enrolment compliance (6 April 2018). In practical terms, for employers currently applying those statutory minimums this means that your employees will see an increase in their pension contributions from one per cent of their annual earnings between £6,032 and £46,350 (based on the 2018 figures) to three per cent.

This could come as something of a shock for employees who didn’t read the fine print on their auto-enrolment announcements as it will mean less money in their April pay packet (though more going into their pension savings).

There’ll also be an increase in the amount you have to pay in as an employer from one per cent of those banded earnings to two per cent.

Again, in practical terms, where staff are affected by this change in contributions it might be sensible to highlight this before the changes take effect noting that this is a statutory requirement. And of course we have a similar issue to look forward to in April 2019, when three per cent for employees and two per cent for employers become five per cent and three per cent respectively.

Just as a reminder, the Pensions Regulator has the ability to fine employers who don’t meet their auto-enrolment obligations and has recently announced a mix of fines and backdated contributions accruing to a bus company in excess of £32,000. Given that the employer had 35 staff it shows that it pays to be compliant with these legal obligations and it’s never a bad time for a review.

Pensions – auto-enrolment contributions edge upwards

Cost vs. benefit of Pension complaints

The Pensions Ombudsman has some key benefits as a venue for employees with pension grievances. Jurisdiction revolves around ‘maladministration’ which can be quite broad and for employees, costs aren’t a real issue.

However given the potential costs raised by these complaints employers and pension schemes often run up large legal and actuarial costs defending Ombudsman claims.

This can lead to some “challenging” cost to benefit analyses for Ombudsman complaints, particularly where there are arguments around payments for distress and inconvenience caused by proven maladministration.

An example being the recent High Court case of Smith v. Sheffield Teaching Hospitals NHS Foundation Trust [2017] All ER (D) 166 (Oct) where an employee who worked for the NHS lost the right to an unreduced pension due to bad information.

The Ombudsman and the Court both decided that she couldn’t have the unreduced pension, but that an award for inconvenience and distress was appropriate. The Ombudsman decided that she should get £500. The employee wanted £36k based on the Ogden tables. The Court decided it would award £2750.

The question is, how much time and effort did the employer end up spending on defending the claim? Given the outcome, it would have probably been better to carefully check the pensions communications in the first place!

Cost vs. benefit of Pension complaints

Pensions Highlights

Rather than concentrate on any particular point this month I've set out a few things that have happened in the pensions world in the last month or so.
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Pensions Highlights

So, where’s “mutual agreement” on this pension form?

Pensions and Employment speak different languages and as an employer it's important to have a team working for you that understands both. A recent example arose in the Pensions Ombudsman case of Mr. O (PO-7782).
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So, where’s “mutual agreement” on this pension form?