Guidance from The Pensions Regulator will see the 90-day limit for reporting late payments becoming mandatory from April 2021 but the wording has caused confusion.
Reacting to the uncertainty created by the coronavirus pandemic, in March the regulator relaxed its usual requirement that auto-enrolment late payments be reported within 90 days.
Defined contribution schemes were given an extended 150 days to declare late payments, with the aim of giving struggling employers more time to work with pension providers to bring late or missing contributions up to date before enforcement action was taken.
A tranche of Covid-related guidance was due to be reviewed in September, in which TPR decided that some sense of normalcy can be afforded in the near future.
In announcing the move, the regulator stated that the extension of the easement is intended to allow schemes and employers “sufficient time to adjust systems and processes, and to ensure employers who suffered the effects of the pandemic have been afforded the additional time to work with their provider to bring any outstanding contributions up to date”.
Mel Charles, director of automatic enrolment at TPR, said: “At the start of the pandemic, we took decisive and proportionate action to support employers and trustees through these challenging times. With businesses and schemes adjusting to a new normal, now is the right time to return to our usual reporting and enforcement.
“We have been clear that employers continue to have to pay contributions in full and on time, and schemes have continued to refer serious auto-enrolment breaches to us that may require enforcement action to ensure compliance and to protect savers.
“Our indications are the majority of employers are paying their contributions in full and on time, and we have not seen any unusual increase in reports of late payments by pension schemes.”
Guidance leaves some perplexed
The precise wording of the guidance did cause some confusion, however, around what becomes mandatory, and when.
While the guidance states that from January 1 2021 TPR will be “asking pension scheme providers and trustees to revert to reporting payment failures that are 90 days outstanding”, it also states: “This will become mandatory by April 1 2021.”
It was not immediately clear whether this meant that late payments in January must be reported by April, or whether the 90-day reporting standard is optional during the 90 days between January and April; and, if the latter, why the guidance did not simply announce the standard would return in April.
David Brooks, technical director at Broadstone, said the guidance was “strangely worded” and risked leaving the impression that schemes were in “limbo”, where “you don't have to report it, but you do have to report it depending on what your systems are doing”.
Of the move more broadly, Mr Brooks said an extension of the 150-day standard would probably help the regulator, especially if it expects a number of employers to have problems later this year and early next year.