The administrators of a master trust failed to report the fact that they had not collected or invested nearly £900,000 of pension contributions on behalf of their members.
Smart Pension Limited, which runs the Autoenrolment.co.uk master trust, failed to tell The Pensions Regulator (TPR) that 498 employers had failed to pay contributions that were due. Smart Pension also didn’t inform the pension scheme members of the issue.
The findings are reported in a determination notice (PDF, 69kb, 22 pages) published today following a TPR investigation.
It found that the scheme trustee, EC2 Master Ltd, did not ensure the scheme had a proper reporting system in place to comply with statutory requirements.
Failing to report material payment failures is punishable by a civil penalty under Section 10 of the Pensions Act 1995.
TPR has now fined the scheme trustee £15,000 for not reporting the missing contributions and for failing to tell members about the problem.
Smart Pension launched Autoenrolment.co.uk in January 2015 to serve the automatic enrolment market.
In total, around 2,115 members were affected by the failures between August 2015 and May 2017. They were only informed that their contributions had not been collected and invested after TPR informed Smart Pension it was their duty to contact them.
Following the investigation, new systems and processes have now been implemented by the trustees and Smart Pension. Smart Pension also worked quickly with TPR to report the employers so enforcement action could be taken where necessary to help protect their members.
Nicola Parish, TPR’s Executive Director of Frontline Regulation, said:
“It is vital that workers can be confident that their contributions are being collected and invested properly so that their savings can grow.
“They have a right to know if payments are not being made and we need to know so that we can investigate why it is happening.
“Smart Pension’s systems and processes were ineffective and the trustee’s failure to act on its responsibilities was unacceptable, but we are encouraged by the commitment of both to improving the way they work.
“We are clear that schemes must have efficient and robust processes in place to protect members’ funds. We will take action where this is not the case.”
- Trustees of defined contribution occupational pension schemes have a legal duty to check that contributions are paid. Trustees should have processes in place to check the contributions that are due and to reconcile those with the contributions that are paid into a pension scheme. Trustees must report a material payment failure (a failure to pay a contribution by the due date if it is considered to be of material significance to the regulator or, in any event, payments which have been outstanding for 90 days) to TPR, and to members within 120 days.
- Between January 2015, when the scheme was established, and 31 October 2017, Smart alerted TPR to 32 reports of late payments. On 31 October 2017, 498 reports of material payment failures were made to TPR, all of which should have been reported earlier. The total value of outstanding contributions in this report was £888,651.94.
- The £15,000 fine was imposed by the Determinations Panel (DP) under section 10 of the Pensions Act 1995 for a failure to report to members some late payments as required by section 49(9) and section 88(1) of the Pensions Act 1995. The maximum fine in the band range that the DP considered appropriate in this case is £25,000.
- The DP is a committee of TPR which operates separately from other parts of the organisation and in its decision making is independent of the case teams and the investigation process. The Panel has a separately appointed membership and separate legal support. The Panel considers all the evidence before it and provides each party with reasonable opportunity to present their case.
- TPR is the regulator of work-based pension schemes in the UK. Our statutory objectives are: to protect members’ benefits; to reduce the risk of calls on the Pension Protection Fund); to promote, and to improve understanding of, the good administration of work-based pension schemes; to maximise employer compliance with automatic enrolment duties; and to minimise any adverse impact on the sustainable growth of an employer (in relation to the exercise of TPR’s functions under Part 3 of the Pensions Act 2004 only).