By Mark Jones, director of Carmarthen-based Clay Shaw Butler chartered accountants and business consultants.
In last week’s Money Matters column, we started to put the spotlight on pensions.
Employers can help promote retirement benefits for their employees in a number of ways including:
- occupational schemes
- group personal pension schemes
- stakeholder schemes.
Group personal pension schemes and stakeholder schemes are personal plans in individual member’s names, where the employer simply acts as an administrator.
There are no accounting or audit requirements for these types of schemes.
An occupational pension is an arrangement an employer can use to provide benefits for their employees when they leave or retire.
There are two main types of occupational pension scheme in the UK:
- salary-related schemes
- money purchase schemes.
Whatever the type of scheme, it will usually have trustees.
Most company pension schemes in the UK are set up as trusts.
There are two main reasons for this:
- it is necessary in order to gain most of the tax advantages
- it makes sure that the assets of the pension scheme are kept separate from those of the employer.
A trustee is a person or company, acting separately from an employer, who holds assets for the beneficiaries of the pension scheme.
Trustees are responsible for ensuring that the pension scheme is run properly and that members’ benefits are secure.
In fulfilling their role, trustees must be aware of their legal duties and responsibilities.
The law requires trustees to have knowledge and understanding of, among other things, the law relating to pensions and trusts, the funding of pension schemes and the investment of scheme assets.
The law also requires trustees to be familiar with:
- certain pension scheme documents including the trust deed and rules
- the statements of investment principles and funding principles.
A code of practice has been issued by The Pensions Regulator (TPR) explaining what trustees need to do in order to comply with the law in this area.
Trustees should arrange appropriate training as soon as they are appointed and should then continue with their learning to keep their knowledge up to date.
New trustees have six months from their appointment date to comply with this requirement.
Trustees have a number of very important duties and responsibilities, which include:
- acting impartially, prudently, responsibly and honestly and in the best interests of scheme beneficiaries
- acting in line with the trust deed, scheme rules and the legal framework surrounding pensions
In addition to these general duties, trustees also have a number of specific duties and tasks that they must carry out.
The main tasks are to ensure the following happen.
- Contributions: The employer accurately pays over contributions on time. There are strict rules covering this area.
- Financial records and requirements: The right benefits are paid out on time. An annual report is prepared. An auditor’s statement is obtained confirming details of the payment of contributions to the scheme and, if required, an audit of the scheme accounts is arranged.
At Clay Shaw Butler, we produced regularly updated Factsheets on pensions and other tax matters. Get in touch if you have any queries.
You can find out more about money matters on the Clay Shaw Butler website (under our news for business section) –
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