Pensions Watchdog Boosts Activity After Enforcement Pause

By Lucia Osborne-Crowley
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Law360, London (February 19, 2021, 4:59 PM GMT) -- Britain's pensions regulator has said it ramped up enforcement activity to protect savers in the last quarter of 2020 after pausing some of its penalties against employers amid the worst months of the COVID-19 crisis.

The Pensions Regulator said on Thursday that its latest compliance study shows that its use of statutory powers jumped almost 50% from the previous three months. The surge in enforcement comes as the pensions watchdog loosens some of the measures it put in place to protect employers during the economic crunch caused by the pandemic.

"The use of our powers declined significantly in the early months of the pandemic as we introduced measures to support employers to ensure that they were not unduly penalized during a period of unprecedented administrative and financial disruption," TPR's director of automatic enrolment, Mel Charles, said.

"As we anticipated, and following the introduction of government support for employers, we have now lifted those easements and are returning to normal levels of enforcement activity," he added.

TPR used its powers for automatic enrolment breaches almost 25,000 times between October and December compared with nearly 16,600 in the previous quarter, the watchdog said.

The watchdog said that most employers have been meeting their contribution requirements despite relaxation of the COVID-19 rules. But TPR added that it will continue to take tough enforcement action if necessary.

"We know these are very challenging times for employers, including those who continue to receive government support, and the full impact of the pandemic on businesses will not be known for some time," Charles said. "However, businesses that employ staff must continue to ensure they do the right thing for savers."

The pensions deficit for the U.K.'s largest companies almost doubled in 2020 as the result of a "perfect storm" of pressures, including the pandemic and Brexit, a retirement consultancy said in January. A pensions deficit occurs when the liabilities of a retirement plan outweigh its assets

The total deficit for defined benefit schemes sponsored by companies listed on the London FTSE 350 exchange rose from £40 billion ($56 billion) in December 2019 to £70 billion last month, consultancy firm Mercer said last month. 

The pensions regulator introduced several temporary "easements" at the start of the pandemic, including allowing companies to suspend for three months "repair" contribution payments to deficits in their pension plans.

The U.K.'s rules on automatic enrollment oblige companies to contribute at least 3% of their employees' earnings to workplace pension plans. Trustees of the schemes are expected to report to the regulator within 90 days if an employer misses those contributions.

TPR extended that deadline to 150 days at the start of the coronavirus outbreak, although it did not waive the requirement for companies to make contributions. The temporary breaks, however, were rolled back in early September. The watchdog warned after the rollback that it would soon resume regular enforcement.

--Additional reporting by Martin Croucher. Editing by Joe Millis.

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