Remedies for late payment of pension contributions

The Pensions Ombudsman and Deputy Pensions Ombudsman have given determinations in two cases where the employer had failed to pay pension contributions across to the pension scheme on time.

In both cases awards for distress and inconvenience were made and the employer was directed to make good any loss arising from a shortfall in the number of investment units bought for the employees as a result of the delay.

In the case of Mr K (CAS-85163-W6Y3), employee contributions of £309.89 had been deducted from the employee’s salary between December 2020 and May 2021 but not paid across to the pension scheme. He complained to the Pensions Ombudsman in March 2022.

The caseworker originally awarded £1,000 for distress and inconvenience but the Deputy Pensions Ombudsman reduced that to £500 recognising the serious illness of the company’s owner was a mitigating factor.

In the case of Mrs S (CAS-41889-X8Q9), the Pensions Ombudsman increased the award for distress and inconvenience from £500 to £1,000 when he determined the complaint. The employer had exacerbated the maladministration by failing to carry out agreed actions or respond promptly to the Pensions Ombudsman.

In the second case, in particular, it is difficult to understand why the problem was not resolved sooner without the complaint getting as far as a determination by the Pensions Ombudsman (the unpaid contributions were in 2016/17).

The cases illustrate the sort of awards which can be made by the Pensions Ombudsman where employers fail to pay contributions on time.

The Pensions Regulator can also issue financial penalties and unpaid contribution notices in respect of automatic enrolment contributions (including a direction for the employer to pay the contributions the employee would have made on their own account and interest).

In 2022/23, the Pensions Regulator recorded an increase in compliance cases and the use of its enforcement powers noting that it has directly engaged with over 600,000 employers within the past twelve months. This highlights that some employers are still failing to comply with their automatic enrolment duties or take steps to remedy breaches.