Pensions Regulator halves enforcement during pandemic

The body overseeing compliance with pension automatic enrolment responsibilities has seen the use of its enforcement powers fall by half, but warns enforcement will be stepped up as coronavirus restrictions are lifted.

Earlier this year The Pensions Regulator (TPR) relaxed its enforcement of certain rules in recognition of the difficulties businesses faced because of the pandemic. This included relaxing its requirement for a 60-day minimum consultation period for reducing contributions into a defined contribution pension scheme, and certain concessions for firms reducing contribution levels for furloughed employees.

This resulted in a 55% reduction in the use of its enforcement capabilities between April and June 2020, compared with the previous quarter.

The number of fixed penalty notices issued for breaches of automatic enrolment rules was 1,555 – six times fewer than the previous quarter. The number of escalating penalty notices issued was 625, which was five times fewer.

TPR said it still monitored compliance during the period and took action where necessary. For example, it acted on reports that a major restaurant company had not paid £45,000 in staff contributions for its UK business; and followed up a whistleblower report that a scaffolding firm had not made contributions amounting to £90,000 for 100 savers.

It warned employers that normal enforcement activity is beginning to return as coronavirus restrictions are lifted.

“In the early months of the pandemic, we recognised the challenges facing employers and took swift and decisive action to support them through the crisis. We gave employers more time to work with their pension provider to ensure pensions contributions continued to be made and, in line with our risk based proportionate approach, we took enforcement decisions in light of pressures on businesses caused by Covid-19,” said TPR’s director of automatic enrolment, Mel Charles.

“However, protecting savers remains at the heart of what we do and we are reminding employers of their legal duties so that staff receive the pensions they are due.

“While our flexibilities have supported employers through unprecedented times, we have kept a close eye on compliance. Early indications are that the vast majority of employers have successfully met their duties, however we will take appropriate action, including financial penalties, where employers fail to act.”

Charles said 1.7 million employers had “done the right thing” and put their employees into a workplace pension.

TPR had not seen a significant or unusual increase in missed pension contributions during the pandemic, with the vast majority of organisations meeting their duties.

The number of penalties for missing or submitting incomplete chair’s statements fell from 52 between January and March to three in April to June. TPR said this reflected a temporary reduction in enforcement in this area.