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Pensions Regulator pays a visit to the recruitment sector

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The Pensions Regulator has started visiting companies which may face challenges in meeting their legal obligations to automatically enrol workers into a pension.

 They have started with the recruitment sector which they say faces “significant compliance challenges”. 
 
As part of this the Pensions Regulator has recommended that employers should have pension providers and advisers in place at least six months before their auto-enrolment staging date.
 
Achieving this could be a problem for around 30,000 employers staging between now and July 2014, because a number of proposed changes to the auto-enrolment rules are unlikely to be finalised before January, giving them less than six months before staging.
 
These employers are effectively being told to choose a provider and adviser without actually knowing what all of the auto-enrolment rules will be. The recruitment sector is therefore not the only one which may be facing significant compliance challenges. Indeed the timing of the proposed rule changes could not be much worse, as we head towards the peak of auto-enrolment activity.
 
Laith Khalaf, head of corporate research at Hargreaves Lansdown, says: “The government has sent employers out to fight the good fight on auto-enrolment but keeps throwing banana skins into the ring. The issues the government is looking at do deserve consideration, but upheaval at this critical juncture jeopardises the successful implementation of the auto-enrolment programme.”
 
The potential legislative changes which are unlikely to be finalised before January cover:
 
 • A charge cap on members of DC default funds
 • Additional quality standards covering:
 • Governance
 • Investment and default options
 • Administration and record keeping
 • Banning consultancy charging for qualifying schemes set up before 10 May 2013 (already banned for AE schemes set up after this date)
 • Banning commission for schemes used as qualifying pension schemes.
 
These are all proposed changes with varying chances of being adopted, however they all may impact on whether an employer can use their current scheme for auto-enrolment, or even whether they will be accepted by a new pension provider. 
 
These issues might be better addressed in 2018, after the auto-enrolment programme is complete, and when employers have time to come up for air.
 
It is also worthy of note that given the number of employers due to auto-enrol in the coming year, there are already fears of a capacity crunch in the industry, without the pressure of further upheaval.

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