It has been well over 10 years since workplace pensions were introduced. All employers, regardless of size, are obliged to make available a qualifying workplace pension for their employees and automatically enrol their employees if they are or when they become qualifying job holders.
There appears to have been an upturn in non-compliance with the auto enrolment duties, as well as employers holding onto contributions deducted from employees pay instead of paying them into the workplace scheme. Here we highlight two recent cases where the employers’ actions have cost them dearly, both financially and reputationally. The first highlights that the Pensions Regulator (tPR) will take regulatory action, no matter the size of the business, and the second shows that complaints to the Pensions Ombudsman (PO) for non-payment of contributions can lead to more than just putting those contributions right.
One Pound Baguettes Bakes and Cakes Ltd.
There was initially a relatively small breach which led to tPR issuing a compliance notice. Adhering to this would have been the end of it. However, the company ignored the compliance notice, leading to a fixed penalty notice of £400. This was not paid, leading to an escalating penalty notice whereby the penalty increased by £500 for every day until compliance.
The total of the fixed and escalating penalties reached £14,400, leading the company to appeal on the grounds of:
- not receiving all of tPR’s letters;
- acting quickly once it received the £14,400 fine; and
- being a small independent business.
The appeal was rejected on all of the grounds.
It was noted that all correspondence had been sent to the correct address. Further, that in any event, this would not have been a reason to overturn the penalties as the company should have been aware of its duties and tPR was not obliged to send reminders.
The company said it would have to cease trading due to the size of the penalty. There was no discretion to reduce the level of the penalty and as there was no reasonable excuse on the part of the company for failing to comply, the penalty was upheld. A payment plan was agreed to avoid the company ceasing to trade.
Taylor Robinson Estate Agents
Mrs S made a complaint to the PO that, despite having pension deductions taken from her pay between April 2016 and November 2018, her employer had not paid them into NEST.
The employer accepted that not all contributions had been paid on time and that she had been enrolled late. The fact that contributions had been deducted and had not been paid into NEST on time amounted to clear maladministration.
Initially the employer agreed to a determination given by one of the PO’s case workers, but it failed to take the agreed actions in the time frame given and did not respond to the case workers further correspondence. As a result, the case was passed to the PO to consider.
The PO awarded £1000 for distress and inconvenience as Mrs S had suffered serious ongoing non-financial injustice that had been exacerbated by the employer’s prevarication and failure to respond promptly, even after it had accepted the caseworker’s opinion.
In terms of financial award, the employer was told to:
- pay the missing contributions to Mrs S’s pension account;
- establish and make good any shortfall in units in Mrs S’s pension account; and
- pay any reasonable administration fee should NEST charge to carry out the calculations.
Our takeaway message for employers:
- Check to ensure that you have met or are continuing to meet the compliance requirements.
- Make sure you have a system to monitor when your employees are eligible for auto-enrolment.
- Take remedial action if there is non-compliance.
- Do not ignore tPR compliance notices. Most steps are easy to rectify and tPR only escalates if these are ignored. Speak to tPR if in doubt.
- Pay employee and employer contributions on time to your workplace scheme.
- If contributions are late, keep the scheme administrator in the loop; tell your employees what has happened and the plan to rectify.
- If a complaint is made by an employee, take it seriously; remedy where necessary and try to avoid it escalating to a formal PO complaint.
- If a complaint is escalated to the PO, be responsive and meet the deadlines set.
- Take advice from your professional advisers.
For legal assistance with auto-enrolment compliance and complaints, please contact Maria Riccio.
Post by Maria Riccio
Maria is a pensions lawyer with over 30 years experience and is a full member of the Association of Pension Lawyers.