PENSIONS INSIGHT
Reconciling workplace pension payments – a fool’s errand?
Henry Tapper, chief executive officer of AgeWage, discusses the unknown – the accuracy of pension contributions and the extent and impact of error – and invokesMonty Python imagery
I n September 2018, the Financial Times reported on PensionSync research: “Millions of pounds of tax relief has been overpaid to workplace pension savers in the UK following errors made by tens of thousands of employers. Regulators conceded this week that workers had wrongly benefited from double doses of pensions tax relief due to employers making mistakes. The revelation came as new analysis suggested half of pension data sent to providers by employers was riddled with errors, including contributions being too low.” The ‘Regulators’ in question was Neil Esslemont of The Pension Regulator (TPR) who was quoted in the article as saying only a “small percentage” of the 1,000,000 employers now offering workplace pension schemes “might be making mistakes” on tax relief, and were typically smaller employers without the help of a payroll team or pension advisers. He said errors could also mean some workers were not receiving tax relief they were entitled to. Neil thought he knew that 95% of contributions had been compliant, but Ros Altmann and Pensionsync pointed out that we may never know if we got
too little or too much money in our pot and whether we paid the right tax for the
ways to integrate their record-keeping systems with the payment systems of the employers who participate in their workplace pensions. This process of continuous improvement will undoubtedly spit out some examples of bad practice and some of deliberate fraud. However, relations between providers and payroll have settled down, the miscreants of the early years of staging are in recuperation, and we have not seen any major casualties either in the worlds of pension provision or payroll. So, some will say that baroness Altmann’s dire prognosis in September 2018 was alarmist. I will side with Ros in refocussing on the ‘nuts and bolts’. Without confidence in the fundamental mechanics, we cannot enjoy the journey; the engine of the car may be investment, but the chassis is data management. If proof is needed of the importance of getting things right first time, look at the issues surrounding contracting out of the state earnings related pension scheme. Employers could elect that they and their staff paid reduced rate National Insurance contributions (NICs) for taking on the payment of guaranteed minimum pensions (GMPs) that would otherwise be paid by the state.
amount we contributed. Neil and Ros have moved on from the positions they held at the time of the article, but the unknown unknowns remain. Pensions data is like that, and those who hunt the holy grail of 100% accuracy are likely to be ambushed by the Knights of Ni – they are on a fool’s errand. TPR’s system of deterrence seems to be working but we must accept we will never know most of the winners and losers. The cost of audit and rectification may be greater than the cost of the original contributions. As payrolls find better ways to integrate with HM Revenue & Customs (HMRC) through the provision of real time information, providers find better 100% accuracy are likely to be ambushed by the Knights of Ni... ...those who hunt the holy grail of
40
| Professional in Payroll, Pensions and Reward | November 2019 | Issue 55
Made with FlippingBook - Online magazine maker