Marion James, Istanbul
Automatic Enrollment into the Private Pension system starts 1 January 2017 and the Treasury has sent out a reminder to private and public sector employers outlining their responsibilities related to the new era of private pensions.
The reminder also contains warnings about penalties for non-compliance and so also serves to say “Don’t say we didn’t warn you”!
Key points they draw to employers' attention are:
• Employers need to identify specific directors (either in head office or field offices) who are authorized to sign a pension agreement with a BES company
• One of the most important responsibilities for an employer once they have signed such an agreement is to deduct contributions from employees via the payroll and pay these to the pension company
• If an employer fails to pass the contribution on to the pension company, or does so late, they are required to make good any financial loss (i.e. lost investment return) that incurs
• Employers need to find out from employees whether they prefer an interest-bearing fund or a non-interesting bearing fund (i.e. Takaful – Islamic style fund) and to make this decision for those who have no preference
• Employers are responsible for providing the pension company with data about their employees, and also to pass on to the company various requests that the employees have relating to the agreement
• Employers who fail to carry out these responsibilities will be subject to fines issued by the Ministry of Labour and Social Security
Participation in the system is, as we know, phased throughout 2017 depending on the size of a company. Only those with more than 1000 employees are required to join the system with effect from 1 January 2017. The Treasury’s announcement brings clarity to this requirement, reminding employers with more than one location that it is the total number of employees across all locations that counts for this test, and that the most up-to-date Social Security data is used in the assessment.