An anomaly created by bringing GPPs under Opra's authority will mean employers holding employee cont...
An anomaly created by bringing GPPs under Opra's authority will mean employers holding employee contributions for up to seven weeks could be complying with regulations but those that hold them for three weeks may well not be.
The Government has been working to bring GPPs in line with occupational schemes. From April 2001 late pension contributions under GPPs will fall under the remit of Opra.
Steven Cameron, pensions development manager at Scottish Equitable, said: "It is an improvement in the security of members within the scheme as we will now have to advise Opra on any late payments, the downside is that every GPP will now need to be reviewed to make sure the payment dates comply with the regulations."
Starting from April 2001 employers will have to pass over contributions deducted from employees within 19 days from the end of the month that they were deducted.
If contributions are deducted from an employee's salary on the first of the month and paid across by the 19th of the following month, seven weeks later, this would be seen as within the regulations.
However, contributions deducted from an employee's salary on the 30th and paid across on the 20th of the following month, three weeks later, would be considered by Opra as a late payment. Opra can impose fines on employers for failure to pass over contributions promptly.
While this has always been the case under occupational schemes, personal pensions had no payment requirements and therefore have been set up with varying contribution dates.
Cameron added: "In addition to reviewing the contribution dates of existing GPPs, IFAs that deal with employers, who previously have been somewhat lax in the payments, will also have to warn their clients that as of April 2001 they could have sanctions levied against them by Opra if they are late passing on contributions."
In the past providers have contacted employers in GPP schemes if the payments were overdue by a month. After three months the scheme provider writes to the member informing them of the late payments.
The ABI has written to the DSS concerning the regulations and has asked that it delay the implementation of the rules until April 2002 because of the level of administration work that will have to be done.
Reviewing existing schemes is just one of the problems these regulations will create, the ABI said. Because GPPs are in effect contracts between the scheme member and the provider, there will be situations in which the provider does not even know who the employer is. This would lead to providers having to manually check all existing policies and inputting the new data into their systems.
The ABI also argued that the more stringent payment requirements for employers could deter them from contributing to an employee's pension. This may lead to several GPPs being shut down in favour of stakeholder pensions in which they do not have to contribute.
Reporting requirements will also apply to single one-off payments, not only to regular contributions, which may create administrative difficulties for providers, the ABI said.
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