Menu Search through site content What are you looking for?

Pensions Regulator enforcement activity reaches record high but recovery rate remains low

  • Press Releases 05 December 2019 05 December 2019
  • UK & Europe

With just one week to go until the General Election, new research from global law firm Clyde & Co has revealed that the UK Government is missing out on £40m of funds by not recovering debts owed from individuals and businesses who have failed to comply with their pensions obligations.

Enforcement actions by the UK Pensions Regulator (TPR) increased by over a quarter in the last year but the recovery rate against recoverable debt remains low at 30%, according to the research.

Data obtained directly from TPR reveals that there were 128,807 enforcement actions taken in the year to 31 March 2019, up 26% from 102,497 in the previous year. Whistleblowing reports received by the regulator saw a 74% increase in the same period, rising from 4,857 to 8,445.

The total value of enforcement actions more than doubled from the previous year, reaching £124.6 million. Yet crucially only £18.4 million of the £62.1 million that is recoverable debt has been recovered.

Terry Saeedi, Head of Pensions at Clyde & Co, comments: "Enforcement activity has increased rapidly in recent years and employers should take note of this activity. With all political parties pledging funding boosts on the campaign trail, it is clear that better recovery could enable them to keep some of their promises.

"Whatever the colour of the new government, it is likely to grant strengthened powers to the regulator to take action against irresponsible employers. As the value of fines continues to increase, we can expect the regulator to look at ways to improve the collection of outstanding debts if the recovery rate does not improve."

Clyde & Co explains that under the pensions obligations, which came into force between 2012 and 2018, all businesses must enrol all eligible employees into a pension scheme or face enforcement action from the regulator. Failure to comply with the auto-enrolment obligations can lead to fines of up to £10,000 per day, depending on the size of the business.

Saeedi continues: "Seven years after the introduction of auto-enrolment, employees are becoming increasingly aware of their rights. The sharp rise in the number of whistleblowing reports received by the regulator shows that these, too, put pressure on employers to comply with their obligations."

Clyde & Co explains that there are four key enforcement actions available to TPR: compliance notices, unpaid contribution notices, fixed penalty notices and escalating penalty notices.

Despite a 4% decrease in the number of compliance notices issued in 2018/19 compared to the previous year, this remains the most commonly used enforcement action, with 58,285 handed out in total. A compliance notice is an order to take steps to comply with the legislation – failure to do so can result in a daily fine.

Saeedi says: "Failure to comply with the obligations after having received a compliance notice can result in a hefty daily fine, which can have significant consequences for smaller companies, who often struggle to implement the necessary changes as many do not have HR departments."

The biggest increase was among unpaid contribution notices, which increased fourfold last year compared to 2017/18. These are issued when an employer has not paid its contributions into a pension scheme by the required date. If contributions are unpaid for too long, the employer becomes liable to pay the employees' contributions as well as their own.