Firms face sanctions over pensions

Thousands of small and medium-sized firms could face fines and other legal sanctions through failing to implement provisions within the new Pensions Act in April 1997, a leading firm of benefit consultants warned yesterday.

Among the most common likely problems will be the failure to give members the option to nominate trustees, to appoint auditors to pension schemes, maintain up-to-date accounts and keep separate bank accounts for trustees.

Johnstone Douglas, a pay and benefits firm which advises companies on how to convert their pension funds from final-salary to money-purchase schemes, yesterday blamed lack of time for the problem.

But Doug Johnstone, the company's managing director, added that he was concerned at the low levels of understanding by many firms of the changes that need to be implemented when the Pensions Act comes into force.

He said: "From our own experience, we believe that almost 90 per cent of small and medium-sized firms have not yet taken advice on the implications of the new legislation, and simply do not understand what needs to be done.

"There is a real danger that they are going to fail to comply by default. This will potentially affect many thousands of members of company schemes."

The deadline next April follows the passing by Parliament of the 1995 Pensions Act, sparked by the disappearance of more than pounds 400m in pension funds belonging to past and present staff of companies owned by Robert Maxwell, the former media tycoon. His death in November 1991 and the hunt for the missing money sparked the Government's pension reforms.

The new Pensions Act, which many experts point out would not have prevented the Maxwell pensioners' money from disappearing, nevertheless imposes onerous conditions on new pension schemes.

Among the changes required under the Act are new requirements for contracting out of the State Earnings-Related Pension Scheme, or Serps.

Company pension schemes will also be required to pay a levy to cover the cost of the Occupational Pensions Regulatory Authority (Opra), the funds' watchdog, together with financing the new compensation scheme. The maximum cost for existing members of company schemes was recently set by the Government on a sliding scale whereby smaller schemes pay more.

In 1997-1998, the annual levy for the regulator will cost between 8p per member in schemes with 10,000 or more members, rising to pounds 1.05 per person for schemes between 12 and 99 members. The maximum compensation levy will be 23 per person a year.

Oliver Heald, the Social Security Minister who announced the charges, said: "I believe we have struck the right balance between the security for each scheme and costs that come with that security."

However, the Act has been criticised for the unnecessary expense and bureaucracy involved in administering it, plus a new minimum funding requirement, which some experts predict could lead to higher employers' contributions.

Despite recent government figures showing that few firms have so far switched out of complicated, and potentially expensive, final-salary pension schemes, experts believe the trickle will turn into a flood after April, when the Act comes into force.

Mr Johnstone said: "There is a real danger [firms] are going to fail to comply [with the Act] by default and Opra may then step in to impose fines."

Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
News
The cartoon depicts the UK (far left) walking around a Syrian child refugee
newsIn an exclusive artwork for The Independent, Ali Ferzat attacks Britain's lack of 'humanity'
Life and Style
tech
Sport
footballManager attacks Sky Sports pundit Jamie Redknapp after criticism of Diego Costa's apparent stamping
News
video
Life and Style
food + drink
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Market Research Executive

£23000 - £26000 per annum + Benefits: Ashdown Group: Market Research Executive...

Recruitment Genius: Technical Report Writer

£25000 - £35000 per annum: Recruitment Genius: A Technical Report Writer is re...

Recruitment Genius: Web Developer - PHP

£16500 - £16640 per annum: Recruitment Genius: This fast growing Finance compa...

Ashdown Group: Client Services Manager - Relationship Management - London

£30000 - £32000 per annum + benefits : Ashdown Group: A highly successful, int...

Day In a Page

Greece elections: In times like these, the EU has far more dangerous adversaries than Syriza

Greece elections

In times like these, the EU has far more dangerous adversaries than Syriza, says Patrick Cockburn
Holocaust Memorial Day: Nazi victims remembered as spectre of prejudice reappears

Holocaust Memorial Day

Nazi victims remembered as spectre of prejudice reappears over Europe
Fortitude and the Arctic attraction: Our fascination with the last great wilderness

Magnetic north

The Arctic has always exerted a pull, from Greek myth to new thriller Fortitude. Gerard Gilbert considers what's behind our fascination with the last great wilderness
Homeless Veterans appeal: Homeless in Wales can find inspiration from Daniel’s story

Homeless Veterans appeal

Homeless in Wales can find inspiration from Daniel’s story
Front National family feud? Marine Le Pen and her relatives clash over French far-right party's response to Paris terror attacks

Front National family feud?

Marine Le Pen and her relatives clash over French far-right party's response to Paris terror attacks
Pot of gold: tasting the world’s most expensive tea

Pot of gold

Tasting the world’s most expensive tea
10 best wildlife-watching experiences: From hen harriers to porpoises

From hen harriers to porpoises: 10 best wildlife-watching experiences

While many of Britain's birds have flown south for the winter, it's still a great time to get outside for a spot of twitching
Nick Easter: 'I don’t want just to hold tackle bags, I want to be out there'

'I don’t want just to hold tackle bags, I want to be out there'

Nick Easter targeting World Cup place after England recall
DSK, Dodo the Pimp, and the Carlton Hotel

The inside track on France's trial of the year

Dominique Strauss-Kahn, Dodo the Pimp, and the Carlton Hotel:
As provocative now as they ever were

Sarah Kane season

Why her plays are as provocative now as when they were written
Murder of Japanese hostage has grim echoes of a killing in Iraq 11 years ago

Murder of Japanese hostage has grim echoes of another killing

Japanese mood was against what was seen as irresponsible trips to a vicious war zone
Syria crisis: Celebrities call on David Cameron to take more refugees as one young mother tells of torture by Assad regime

Celebrities call on David Cameron to take more Syrian refugees

One young mother tells of torture by Assad regime
The enemy within: People who hear voices in their heads are being encouraged to talk back – with promising results

The enemy within

People who hear voices in their heads are being encouraged to talk back
'In Auschwitz you got used to anything'

'In Auschwitz you got used to anything'

Survivors of the Nazi concentration camp remember its horror, 70 years on
Autumn/winter menswear 2015: The uniforms that make up modern life come to the fore

Autumn/winter menswear 2015

The uniforms that make up modern life come to the fore