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Need for inactive company pension schemes?

Smart Pensions are imposing a £15pm +VAT charge, can an inactive pension scheme just be closed?

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Smart Pensions have informed me that they will be imposing a £15pm + VAT charge on seven of my smaller payroll clients. In most cases the sole employee is a spouse who has already opted out. Given that Declarations of Compliance have already been made, and no pension contributions are necessary, is it possible to simply close the pension schemes until such times as the next re-enrolment date comes around?

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By Paul Crowley
18th Oct 2021 16:40

Change to Nest would probably be a better option

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By David Ex
18th Oct 2021 17:19

Not sure what you mean by “close” the pension scheme. An individual can transfer their pension savings to a new provider (eg SIPP).

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Replying to David Ex:
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By Kernowlive
18th Oct 2021 17:22

Thank you David for your response. No pension contributions have ever been made, and none are ever likely to be made, so there is nothing much to transfer.

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Replying to Kernowlive:
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By David Ex
18th Oct 2021 17:49

Kernowlive wrote:

Thank you David for your response. No pension contributions have ever been made, and none are ever likely to be made, so there is nothing much to transfer.

Ah, apologies, misunderstood.

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By Kernowlive
18th Oct 2021 17:19

Thank you Paul for your suggestion. I was aware that Nest don't charge the employer, but I was thinking why transfer the schemes to Nest right away if the schemes won't be used for maybe another couple of years? By then the clients might have ceased trading, or I might have decided to call it a day. Is there any legal requirement to have a company pension scheme if the scheme is inactive?

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Replying to Kernowlive:
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By Paul Crowley
18th Oct 2021 18:00

As I understand the rules, yes. All employees are entitled to join the workplace pension scheme.
The scheme must exist unless the employer is a non employer, just directors, nobody else.

Any of these wives directors?

https://www.gov.uk/workplace-pensions/joining-a-workplace-pension

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Replying to Paul Crowley:
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By rmillaree
18th Oct 2021 18:51

Paul Crowley
"The scheme must exist unless the employer is a non employer"

I can't see that confirmed on the attached link Paul - do you have a link that confirms the above statement is true.
It would seem a pain having to set up and administor a scheme when there are no automatically or otherwise enrolled employees

Not saying i don't believe you honest :)

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Replying to rmillaree:
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By Hugo Fair
18th Oct 2021 20:06

Feeling lazy, so can't be bothered to look up the relevant source - but this was a common question right at the start of AE and I'm 100% certain of my answer (as given by TPR):

* Does a company *have* to have a suitable scheme set up even when there are no (past or current) contributing members?
Answer = No.

* But does a company *have* to have a suitable scheme in place as soon as it becomes needed (either because a new member of staff doesn't opt-out OR because an existing opted-out member of staff elects to opt-in OR because the cycle has re-started and you have to put a previously opted-out member of staff into a relevant scheme - even if you 'know' that they will subsequently opt-out)?
Answer = Yes (and there may not be time to get such a scheme set-up without failing to comply with your AE obligations)!

So in essence, Yes you need to have a scheme in place (or risk fines popping up when you least expect them).
But you don't have to pick a scheme that penalises you in the way described by OP.

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Replying to rmillaree:
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By Paul Crowley
18th Oct 2021 20:26

https://www.gov.uk/employers-workplace-pensions-rules

"If your employer does not have to enrol you by law, you can still join their pension scheme if you want to. Your employer cannot refuse."

I would think a scheme needs to exist to be able to join.

There was an absolute obligation for a scheme to exist before auto-enrolment and before compulsory employer contributions. The employer needed to have an actual scheme number so that employees could choose between the employers scheme and going it alone.
We had a pension provider that gave us a list of numbers to mach the number of employers. The only one actually used was our own company. That pension was not good enough for auto-enrolement, so we needed to change for the new rules

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Replying to Paul Crowley:
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By rmillaree
19th Oct 2021 07:45

Thanks for clarification Paul .

Personally I would not have made the presumption you have - to me setting up a scheme the moment you are required to would not seem inconsistent with the original linked guidance.
Note I dont know the answer here but would like to see some positive confirmation bearing in mind that setting up a scheme pre any interaction with scheme doesn’t seem necessary - I will try and do some research here if I get time - not really my area but I can’t remember reading anything that specifically says scheme needs to be pre done prior to any potential necessary scheme interactions with employees.

Ref your second point again it’s a given if employee has interaction with companies pension scheme then one would need to exist - but if no employer has never had any eligible employees or all employees who are non eligible have not expressed an interest then ?

So while sitting firmly on the fence would be nice to see specific confirmation scheme must exist if there are no eligible employees and no other employees have indicated they would like to join - and/orfor situation where employee count (non directors) is nil

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Replying to rmillaree:
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By Hugo Fair
19th Oct 2021 11:13

At the risk of invoking the argument raging on a different thread (in essence about pragmatism vs correct compliance) ...

"if there are no eligible employees and no other employees have indicated they would like to join"
... as I mentioned earlier TPR, when questioned on an identical example, pointed out that: a) you may take on an eligible employee in the future; and b) another employee's right to request joining doesn't cease to exist merely because he/she has not yet made that request; and c) that you potentially have to re-enrol an eligible employee (even if they had previously opted-out) when the re-enrolment cycle rolls round next.

" setting up a scheme pre any interaction with scheme doesn’t seem necessary"
... of course it's not necessary prior to any interaction with the scheme, but as soon as one of the triggering events (in my previous paragraph) occur then the clock starts ticking towards various deadlines with which you have to comply.
And these all require a scheme to have been set-up in order for the deadline to be met (e.g. enrolment of an eligible employee has to be completed before he/she can opt-out) ... which takes time that will usually takes longer to that necessary for the deadlines to be met.

So their guidance is unequivocally that a relevant scheme should be set-up (if only on a just-in-case basis) ... feel free to ask them for confirmation.
[My contact, senior within policy, has recently retired or I'd do so myself].

The only option that I can see which might meet your intentions is where the company has only the one director and zero other staff, which I believe makes them exempt from the AE requirements. But the danger then, as TPR would point out, is that in the future the employer forgets about this exempt status and takes on a part-timer (and the company immediately loses that exemption - so see all the above consequences).

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