Automatic enrolment  

Regulator investigates phoenixing employers

Regulator investigates phoenixing employers

The Pensions Regulator has launched an investigation into employers who are phoenixing to avoid their pension duties.

The watchdog revealed today (July 17) that it has become aware of a number of employers that appeared to have changed their name to escape their pension liabilities.

Phoenixing involves companies and individuals deliberately seeking to evade liabilities by closing down a business, only to resurface in another. 

Investigators from TPR are now working with the Insolvency Service and other agencies to take action against offenders that try to use this ploy.

Among the offences that may have been committed are fraud, theft and wilfully failing to comply with auto-enrolment laws, it stated.

The regulator disclosed that a number of investigations are now ongoing in cases involving scores of employees who have been denied pensions.

The vast majority of employers comply with their workplace pension duties, automatically enrolling eligible employees into a scheme and paying the correct level of pension contributions on their behalf.

However, TPR believes that a small minority of directors could be trying to hide their non-compliance with the law by opening new businesses, transferring their workforce across and then dissolving the original company.

The suspicion is that by changing name, those involved hope to avoid having to pay the pension contributions due, it stated.

The watchdog investigators are also looking into whether "rogue advisers could be suggesting to employers that they use the tactic to avoid their duties," it added.

FTAdviser reported in May that the regulator is cracking down on employers suspected of not complying with their auto-enrolment duties by conducting short-notice inspections.

Darren Ryder, TPR’s director of automatic enrolment, said some bosses "might think that changing the name of their company they can avoid their duties but they should know they are on our radar.

"We are aware of the camouflage they are trying to use and will not be fooled by it.

"We will not tolerate any attempt to deny employees the workplace pensions they are entitled to – and will take action against those who try to dodge their duties."

Tom Selby, senior analyst at AJ Bell, said it was "shocking" that some employers were using these tactics in an attempt to dodge paying pensions to their staff.

He said: "In doing so, these companies are failing to pay workers the full salary package they are owed and risk facing the wrath of the regulator.

"It is vital TPR clamps down on these dodgy practices as a matter of urgency in order to protect employees and deter others who might be tempted to copy the tactic."

He added: "Given the seriousness of these alleged breaches, it would be no surprise to see the regulator pursue the heaviest possible sanctions.

"Those who willfully fail to put eligible workers into a pension scheme, as appears to be the case here, could face criminal prosecution and a maximum prison term of two years."