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.
It would also be welcomed by employers, who “won’t be feeling like they’re under pressure”, he said.
But he cautioned that the system should be fair to members as well, and added that, with people gradually returning to work and society at least pretending at a return to normalcy, “the systemic problems that employers face should surely be fading rather than continuing”.
“It would seem strange to continue with the easement,” he said, while acknowledging that this verdict might change depending on the reasoning behind TPR’s decision.
In response, a TPR spokesperson said: “We expect all schemes to return to the normal, maximum 90-day late payment period as soon as possible. However, as stated in the guidance, we appreciate some will need time to implement the changes required to amend their internal systems and communications.
“Whether it is 90 or 150 days does not change that schemes which have any concerns around material payment failures should report these to TPR at the earliest opportunity as set out in our codes.”
The regulator has asked all schemes to return to the normal 90-day maximum by January 1 2021, but will not treat it as mandatory until April 1.
Industry welcomes new guidance
Overall, pensions specialists have welcomed the regulator’s new guidance on late payments.
Laura Myers, partner and head of DC at LCP, said: “It’s positive that TPR recognises that these are challenging times still for many employers and is looking to ease the burden.”
However, Ms Myers said it should be stressed that “there is no change in the employer’s responsibility to pass on both their own and their employees’ contributions to the pension provider on time”.
“Trustees remain responsible for monitoring late payments, but will have more time to resolve issues,” she added.
Dale Critchley, workplace savings and retirement policy manager at Aviva, concurred with TPR’s assessment.
He said: “There hasn’t been any material change in the number of employers paying us late. Despite the challenges they may be facing, the vast majority of employers are still paying us on time.
“We recognise that some employers may be struggling financially and that they may need the additional flexibility around pension contributions that the regulator has allowed.
"However, that needs to be balanced with the need to invest employee pension contributions promptly.”
Benjamin Mercer is a reporter at FTAdviser's sister publication Pensions Expert
