DWP Pensions Stakeholder Newsletter

29 January 2014

The Pensions Stakeholder Team has circulated an update regarding workplace pension charges and mandating the SCON.

Charges in Workplace Pensions

The Minister for Pensions, Steve Webb, laid a written ministerial statement before Parliament confirming the government's commitment to tackling high charges in workplace pension schemes. The Statement reads as follows:

“This government is committed to tackling high charges in workplace pension schemes. In particular, for those workers who do not exercise any choice, where they are automatically enrolled into a scheme then remain in the default fund.

Our consultation on pension scheme charging closed at the end of November. We continue to examine the responses, and will bring forward further proposals, in due course. However, one strong theme to emerge is about the timing for the implementation of any changes.

We remain strongly minded to cap pension scheme charges in the default funds used for automatic enrolment. However, we have consistently encouraged firms to start getting ready for automatic enrolment twelve months ahead of the time the new employer duties apply to them. Therefore, to give those employers at least twelve months notice of the rules that will apply to them; I can confirm that any cap on charges will not be introduced before April 2015.”

Mandating the Scheme Contracted-Out Number (SCON)

We are working closely with colleagues for HMRC on the introduction of the Single Tier Pension in April 2016 which will bring about the end of Contracting-Out arrangements. As a result employers have an obligation to inform HMRC of “which employee belongs to which contracted-out scheme”, so that HMRC can close down all open periods of contracting-out on the individual National Insurance records.

To facilitate this, from 6 April 2014 employers will be legally required to show the SCON, in addition to the Employer's Contracting-out Number (ECON), on their submissions via the real time information service when submitting contracted-out National Insurance Contributions for employees who have been in a contracted-out scheme during the tax year.

Pension Scheme Administrators will play a key role in getting Employers ready by helping employers identify the correct SCON for the pension scheme membership in time to submit that SCON as part of the April 2014 onwards RTI monthly submissions to HMRC.

HMRC have asked, if you are Pension Scheme Administrator to assist with this by treating SCON identification requests from employers with pension scheme members in your pension scheme with urgency.

This will allow HMRC to have accurate records and prevent further significant contact to employers and Pension Scheme Administrators from HMRC in the lead up to 2016 and afterwards following our scheme membership closure activities. ‘