UK: Clyde & Co Research Shows Pensions Regulator Enforcement Activity Doubles In A Year To Record High
Last Updated: 17 August 2018

Enforcement actions from the UK Pensions Regulator (TPR) more than doubled over the last year, while whistleblowing reports received by TPR increased by 35%, according to research from global law firm Clyde & Co.

Data obtained directly from TPR shows that there were 102,497 enforcement actions taken by regulator in the year to March 31st 2018, up from 50,068 in the previous year. Indeed, enforcement actions taken by TPR in 2017/18 make up 63% of all enforcement actions taken since April 1 2013. While whistleblowing reports received by the regulator rose to 4,856, from 3,593 over the same period.

Mark Howard, Head of Pensions at Clyde & Co, comments: "Six years on since the introduction of Automatic Enrolment (AE), the regulator is bearing its teeth and employers are now feeling the full force of its enforcement powers."

"The biggest concern for all employers should be the rate at which enforcement activity is increasing. In the last six months of 2017/18 the regulator handed out £7.4m in fixed penalty notices, compared to £4.9m for the whole of the previous year (2016/17), so alarm bells should certainly be ringing."

Clyde & Co explains that under the workplace pension's law, which came into force in 2012, all businesses must enrol all eligible employees into a pension's scheme or face enforcement action from the regulator. Failure to comply with the auto-enrolment regulations can lead to fines of up to £10,000 per day, depending on the size of the business.

Howard continues: "The primary driver of the uptick in whistleblowing reports is almost certainly AE compliance failures. Over the last year the regulator has been on a significant publicity drive to ensure employees are aware of their rights and employers are aware of their obligations. In some respects, it appears to be paying off."

"It is something of a virtuous circle for the regulator as the more noise is made about employers being prosecuted for AE compliance failures, the more likely whistleblowers are to report suspected 'wrongdoing', which gives the regulator more reasons to target employers and so on."

Examples of prosecutions

  • Two recent examples of prosecution from TPR include:
  • In May 2018, Crest Healthcare was prosecuted and fined more than £20,000 after being found guilty of not complying with auto-enrolment duties, and of providing false information to TPR about a workplace pension scheme.

In August 2018, the first case of its type for a third party working on behalf of an employer, TPR announced it is prosecuting an accountant after he allegedly falsely claimed that a London-based restaurant, run by Primadell Ltd, had enrolled its staff into a workplace pension scheme.

The Pensions Regulator using its full arsenal of enforcement actions

Clyde & Co points out that across four key enforcement actions available to TPR regulator (compliance notices, fixed penalty notices, escalating penalty notices and unpaid contribution notices) all have more than doubled over the last year.

One of the most commonly used enforcement actions is to issue a compliance notice – an order to take steps to comply with the legislation. Howard warns that "Compliance notices are a final warning - failure to comply can result in a daily fine, which could seriously hinder many organisations' profitability."

"Similarly, unpaid contribution notices carry a hidden threat. If contributions are unpaid for too long the employer becomes liable to pay the employees' contributions as well as their own."

"What is surprising is the growth in the number of escalating penalties. These are used for more serious or persistent breaches. But they can only be issued after the regulator has first issued a compliance notice, unpaid contributions notice or a notice requesting information. So these are being issued against employers who are ignoring TPR in a misguided hope that they will go away."

"As the data shows, the risk of non-compliance is severe. Failure by employers to stay up to speed, understand the technicalities and enrol employees could land them with an eye watering fine."

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