The Pensions Regulator bites!

If you read nothing else in this blog, here are some of the key takeaways for anyone involved in running a pension scheme:

  • Over 40,000 employers were fined by The Pensions Regulator (TPR) for non-compliance regarding their workplace pension auto-enrolment scheme during 2018.
  • 20,298 employers had been fined by TPR for non-compliance in Q1-Q3 2019.
  • Fines for non-compliance can range from £400 fixed penalty to a varying daily escalating penalty of up to £10,000. Fines can be quite large; recently, an employer was fined £350,000 for non-compliance.
  • The Financial Conduct Authority (FCA) was fined by TPR for failing to comply with pension scheme governance obligations.
  • It’s imperative that employers implement a formal pensions governance strategy to ensure that all non-compliance risks are identified, managed and mitigated.

So, what is pensions governance?

At its simplest level, it’s about having a review process that ensures that you are doing the right things, at the right time, in the right way. But, good governance extends beyond this. It’s about setting strategic objectives to ensure that your scheme achieves good outcomes for members, enhancing efficiencies whilst contributing significantly to your risk and cost management.

The introduction of auto enrolment may seem like a distant memory for employers but TPR certainly doesn’t think so and is taking its enforcement powers very seriously.

In response to a recent freedom of information request, TPR confirmed that:

  • 40,301 employers were fined for failing to meet the required standards of compliance regarding their workplace pension auto enrolment scheme in 2018.
  • 20,298 employers had been fined for non-compliance during 2019 (Jan-Sept)

This was part of the country-wide short-notice inspections undertaken by The Pension Regulator during 2019. They reported that 74% of spot checks revealed breaches of pension’s legislation, with 76% of these resulting in enforcement action.

Breaking the law…some examples

The Pension Regulator warns employers clearly that automatic enrolment is a legal duty and failure to act in time can result in penalties. Fines can range from a £400 fixed penalty to a varying daily escalating penalty, which can be anywhere between £50 and £10,000.

The penalties can cover a range of issues so employers need to be clear that their duties, and the actions required, extend beyond simply putting their staff into a workplace pension scheme.

Fines for non-compliance can be large:

  • A London-based company was recently required to pay a fine of £350,000 arising from multiple failures, together with over £100,000 of backdated pension contributions.

Their lack of compliance initially came to light when the employer failed to re-declare within the required timescales, and subsequently failed to provide documentation to show that it had completed its re-enrolment duties. Ultimately, TPR unearthed numerous failures, including incorrect opt-out processes, communication failures and incorrect contribution calculations.

Even TPR’s friends are not immune from scrutiny. Despite recently producing a ‘joint regulatory strategy’ aimed at strengthening their relationship:

  • The FCA was ordered to pay a £2,000 fine by TPR over pension scheme ‘governance failings’.

Workplace pensions are becoming ever more complex to manage due to the increased regulation and constantly changing legislation, and despite the initial amusement of the FCA being fined by their ‘partner’, it’s absolutely clear that employers cannot afford to be complacent when it comes to their pension duties.

TPR requires employers to make sure that their workplace pensions are monitored regularly and deliver value for money for their members, but what does this mean in practice?


The key in determining what level of oversight you need to take is aligned to the role that your pension scheme fulfills in delivering your business objectives.

If you offer a pension scheme only to meet the minimum auto-enrolment requirements, then ‘good governance’ could mean looking into the more fundamental aspects of providing a pension scheme – making sure your scheme is well administered, paying contributions on time, setting the required communications to members to ensure they make informed decisions about their retirement savings and keeping on the right side of the law.

If however, the pension is a key part of the total reward package you offer, then your oversight needs to also extend to areas that will have the most impact on member outcomes. This could include:

  • greater focus on member communications and engagement
  • greater understanding of the value of the contributions they and the employer make
  • greater scrutiny around the default investment offered – its performance and suitability
  • reviewing scheme and fund charges
  • providing the full range of retirement options

Regardless of who your pension provider is, or the type of arrangement used, employees will always see their employer as having a duty of care toward their pension provision as it is ‘their company pension’ and will approach you if things go wrong.

The key point is pensions governance simply cannot be ignored. Every employer needs to have a clear pension governance strategy which as a minimum, demonstrates to TPR, your schemes compliance with auto enrolment legislation.

Knock! Knock!

In a message to employers, TPR reminds on its website that:

“Whether you employ five or five thousand staff, you need to be compliant with all your automatic enrolment duties. Our inspection teams visit employers of all sizes, all over the country, so make sure you’re meeting your legal duties as we could be knocking at your door next.”

So, we now ask you – if The Pensions Regulator were to send you a ‘Notice of Inspection’, how comfortable would you feel?

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