Surge in AE non-compliance during pandemic

Surge in AE non-compliance during pandemic

The number of warnings issued to employers for failing to pay pension contributions for staff has increased by almost 200 per cent between July and September, the regulator has said.

In its latest quarterly compliance and enforcement bulletin, published today (November 19), the Pensions Regulator (TPR) revealed that 1,026 unpaid contributions notices were issued in the three-month period, compared with just 352 between April and June.

These notices require an employer to ensure all backdated contributions are paid before a certain date.

In addition, the number of compliance notices issued during the period increased 17 per cent, from 13,185 in the previous quarter to 15,420.

This is the notice employers receive when they have breached their auto-enrolment duties and outlines what steps they need to take – or stop taking – to be compliant within a given timeframe.

Mel Charles, director of auto-enrolment at TPR, warned employers who deliberately fail to meet their AE responsibilities risked facing legal action.

Mr Charles said: “While we issued easements at the start of the pandemic, we closely monitored compliance and took action where necessary. We continued to target employers who committed serious breaches and where staff contributions were at immediate risk.

“As predicted, we are seeing a return to normal levels of enforcement activity in line with our expectations, but we will monitor this closely.

“Indications are that 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.”

TPR introduced a number of flexibilities in March to give struggling employers more time to work with their provider to bring missing pension contributions up to date, before taking enforcement action.

The regulator asked providers to not report any employers who were 90 days late in paying their contributions under auto-enrolment regulations but instead wait for 150 days.

At the beginning of lockdown, the regulator also said it did not intend to issue any new unpaid contribution notices to employers, and asked providers “not to report any new payment failures”.

Tom Selby, senior analyst at AJ Bell, said although some of the latest non-compliance will be due to simple errors, and the regulator has been clear that it will take a pragmatic approach where genuine mistakes have been made, employers need to get on top of their pension duties now.

Mr Selby said: “[TPR] is also firing a warning shot across the bows of UK employers that it will not stand for companies flouting the rules, and retains the power to issue huge fines and pursue legal action if non-compliance persists.

“Although times are clearly tough, nobody would stand for not being paid for the hours they have worked during lockdown, and so the same must be true of auto-enrolment pension contributions.”

The bulletin also showed how TPR secured its first confiscation order under the Proceeds of Crime Act (POCA) 2002 in September when a fraudster who stole more than £250,000 from a charity’s pension scheme was told he must pay back the money he stole, or face further jail time.