Beyond Compliance
At WPD, we provide comprehensive pension scheme reviews and ongoing support to ensure employers meet all their responsibilities while maximising value for their employees. Our systematic approach identifies compliance gaps, highlights improvement opportunities, and provides practical solutions that work for businesses of all sizes. Contact us to schedule your pension scheme MOT and ensure you’re meeting all your obligations while building a pension arrangement that truly serves your workforce.
It’s easy to forget that auto-enrolment schemes are Occupational Pension Schemes. They come under the regulatory oversight of The Pensions Regulator (TPR) and carry significant rules and responsibilities that extend far beyond simply enrolling employees and making contributions. For many employers, “regulatory drift” can occur – where they unintentionally find themselves falling foul of their employer duties without realising it.
The Foundation Question: Do You Care?
Before diving into the technical responsibilities, employers face a fundamental question: is your employees’ financial future your problem? It’s not an unreasonable question, but those focused on employee retention, staff morale, and simply doing the right thing will recognise that it is indeed their concern. The Health and Safety Executive reports that an estimated 17 million working days were lost due to work related stress, depression, or anxiety in 2021/22. While it’s simplistic to equate short-term money worries with long-term pension planning, financial stress undeniably impacts workplace productivity and employee wellbeing.
Legal Duties: The Non-Negotiables
Auto-Enrolment Compliance
Your basic legal obligations include:
- Enroling eligible workers into a qualifying pension scheme
- Making minimum contributions (currently 3% employer, 5% employee including tax relief)
- Re-enroling workers every three years
- Maintaining accurate records of enrolment and contributions
- Submitting declaration of compliance to TPR
Ongoing Scheme Management
Beyond auto-enrolment, you have broader duties as a scheme sponsor:
- Appointing trustees or ensuring proper governance of your chosen scheme
- Regular scheme monitoring to ensure it continues to meet member needs
- Contribution payment within prescribed timeframes
- Record keeping for all scheme-related decisions and communications
- Member communication about scheme changes or important developments
The Hidden Responsibilities: Where Employers Often Slip Up
Payroll Integration Issues
Many employers underestimate the complexity of integrating pension contributions with their payroll systems. Common mistakes include:
- Incorrect contribution calculations especially during pay increases or bonus payments
- Wrong pensionable salary definitions leading to under or over-contributions
- Timing errors in when contributions are deducted and paid to the scheme
- Tax relief complications particularly when switching between different calculation methods
Employee Status Changes
Managing pension obligations when employees’ circumstances change presents ongoing challenges:
- Automatic re-enrolment for employees who have opted out
- Joining and leaving procedures when staff turnover is high
- Salary sacrifice complications when pay changes significantly
- Part-time and seasonal worker enrolment requirements
Scheme Selection and Review
Choosing and maintaining an appropriate pension scheme involves more than finding the cheapest option:
- Due diligence on scheme providers and their financial stability
- Charge comparison and understanding the impact on members
- Investment performance monitoring especially of default funds
- Regular scheme reviews to ensure ongoing suitability
The Scheme Review: Your Pension MOT
Just as your car needs an annual MOT, your pension scheme needs regular health checks. A comprehensive scheme review is like an MOT for pension schemes – done correctly, it will:
Check Compliance
- Verify that all employer duties have been met
- Ensure the scheme basis has been set up correctly
- Identify any regulatory drift before it becomes a problem
- Review record-keeping and documentation
Assess Value
- Compare your scheme with current marketplace options
- Analyse charges and their impact on member outcomes
- Review fund performance, particularly default funds
- Evaluate member services and communication tools
Identify Improvements
- Highlight opportunities for cost savings or enhanced benefits
- Recommend process improvements for easier administration
- Suggest employee engagement initiatives
- Consider salary sacrifice implementation or optimisation
Common Employer Mistakes and How to Avoid Them
Contribution Basis Errors
- Many employers set up their schemes with incorrect contribution calculations:
- Using basic salary only when total earnings should be included
- Excluding bonus payments from pensionable earnings
- Incorrect salary sacrifice setup leading to National Insurance complications
Communication Failures
Underestimating the importance of ongoing employee communication:
- Annual statements not properly explained to members
- Scheme changes not communicated clearly or in time
- Opt-out procedures not properly explained
- Financial education opportunities missed
Record-Keeping Deficiencies
- Poor documentation can lead to regulatory issues:
- Inadequate enrolment records making re-enrolment difficult
- Missing contribution histories causing problems when employees leave
- Unclear decision-making trails making scheme reviews challenging
The Business Case: Why Good Pension Management Matters
Staff Retention and Recruitment
In a competitive job market, good pension provision can be a differentiator:
- Benchmark benefits help attract quality candidates
- Salary sacrifice arrangements can enhance the overall package without increasing costs
- Financial wellbeing programmes demonstrate employer care and commitment
Risk Management
Proper pension management reduces various business risks:
- Regulatory penalties from TPR for non-compliance
- Employee claims for incorrect contribution calculations
- Reputational damage from pension-related issues
- Administrative burden from poor system integration
Cost Control
Effective pension management can actually reduce costs:
- Scheme efficiency through regular reviews and provider changes
- National Insurance savings through salary sacrifice
- Reduced administration through proper system setup
- Bulk purchasing power through scheme consolidation
Payroll and Pay Rises: The Often-Overlooked Connection
Much has changed with payroll system functionality over the last decade. It’s worth checking whether your current payroll is helping or hindering pension scheme management:
System Capabilities
- Automatic calculation of contributions based on complex rules
- Integration with pension providers for seamless data transfer
- Reporting tools for monitoring compliance and identifying issues
- Salary sacrifice handling including National Insurance calculations
Pay Agreement Considerations
When negotiating pay increases, consider whether agreements should include:
- Pension contribution increases to maintain retirement income targets
- Salary sacrifice optimisation to maximise the value of pay increases
- Flexible benefit options allowing employees to choose their preferred mix
Building a Sustainable Approach
Regular Review Cycle
Establish a systematic approach to pension management:
- Annual scheme reviews to assess performance and compliance
- Quarterly contribution monitoring to catch errors early
- Monthly payroll reconciliation to ensure accurate processing
- Ongoing market awareness to identify improvement opportunities
Professional Support
Consider when to seek external expertise:
- Initial scheme setup to ensure compliance from the start
- Complex employee situations requiring specialist knowledge
- Scheme changes that impact multiple systems or processes
- Regular health checks to prevent regulatory drift
- Employee engagement programmes requiring specialist communication skills
Documentation and Governance
Maintain proper records and decision-making processes:
- Policy documentation covering all aspects of scheme operation
- Decision logs explaining why particular choices were made
- Regular trustee or governance meetings if applicable
- Employee communication records demonstrating compliance with information requirements
The Cost of Getting It Wrong
The penalties for failing to meet pension obligations can be significant: Consider financial penalties, operational disruption, reputational risk and loss of employee trust.
Looking Forward: Anticipating Future Changes
The pensions landscape continues to evolve, and responsible employers should anticipate contribution increases, regulatory developments including stricter compliance and new disclosure requirements, plus technological advances.
The Positive Approach: Beyond Compliance
Rather than viewing pension responsibilities as a burden, forward-thinking employers see them as an opportunity:
Employee Engagement
- Financial education programmes that help staff understand their pensions
- Regular workplace presentations to maintain awareness and engagement
- One-to-one advice sessions for employees with specific questions
- Digital tools that make pension management easier for employees
Competitive Advantage
- Enhanced employer brand through superior pension provision Improved retention rates among valuable employees
- Attraction tool for recruiting quality candidates
- Demonstration of corporate responsibility and long-term thinking
Business Integration
- Alignment with HR strategy and overall employee value proposition
- Integration with broader financial wellbeing initiatives
- Support for business continuity through stable, satisfied workforce
- Risk management through proper governance and compliance
Conclusion: Ownership of Your Pension Responsibilities
Effective pension management isn’t just about ticking compliance boxes – it’s about taking ownership of your employees’ financial futures while protecting your business from unnecessary risks and costs. The complexity of modern pension arrangements means that many employers inadvertently fall short of their responsibilities, not through malice or negligence, but simply through lack of awareness or resources.
However, the consequences of getting it wrong are too significant to ignore. Regular scheme reviews, proper professional support, and a systematic approach to pension management aren’t just good practice – they’re essential business activities that protect both your employees and your organisation. The question isn’t whether you can afford to invest in proper pension management, but whether you can afford not to. With 17 million working days lost to stress-related absence, much of it financially driven, and increasing regulatory scrutiny of pension provision, the business case for getting pensions right has never been stronger.
Remember, your employees are relying on the decisions you make today to fund their retirement decades from now. That’s a responsibility worth taking seriously.