The Pensions Ombudsman has upheld a complaint against a member’s employer for various errors made in relation to pension contributions. The fact that the employer had repeatedly not engaged with the Ombudsman resulted in a further fine.

The member had opted out of his employer’s pension scheme, but subsequently re-enrolled. He later discovered multiple issues with his pension including:

• His employer had made no contributions into the scheme for over a year, despite deductions having been made from his wages during that time.
• Deductions had been calculated based on his net pay, rather than gross pay. The employer claimed this was due to an error in their automatic systems.  

The Ombudsman ordered that the employer brought the pension contributions up to date by a deadline, but the employer missed that deadline and had to be chased.  

The employer was then asked to provide sufficient information to allow the pension scheme provider to calculate what losses the pension value had suffered due to the errors (in other words, what additional investments could have been made if the correct contributions had been made?). Again, the employer failed to provide the required details, despite several chasers by the Ombudsman.  

The Ombudsman held that the employer’s continued failure to make the correct contributions, and their failure to respond to the Ombudsman in a timely manner, all amounted to maladministration. The employer was ordered to pay £1,000 in compensation and to restore the member’s pension.

Even then, the employer failed to restore the pension, so was ordered to pay an additional £500 in compensation.

The scheme provider was also held to be in breach of their duties, because they failed to notify the regulator that the employer had not made contribution payments by their due date.

Key takeaways 

• It is vital that employers engage fully with the Pensions Ombudsman at all stages of a complaint. Even on occasions where a member's complaint seems weak, the Ombudsman will expect employers to take it seriously and respond to them in a timely manner.
• Employers must be on top of their auto-enrolment duties. The Pensions Regulator has the power to fine employers up to £10,000 per day for serious or persistent breaches of auto-enrolment legislation. Even small failures can lead to penalties from the Regulator (see our ebriefing on auto-enrolment compliance).
• Employers need to ensure that the correct contributions are being made to pension schemes and that all employees that should be enrolled are enrolled.
• Whilst it is not practical for organisations (particularly large ones) to individually calculate pensions contributions without the aid of software, employers should be carrying out due diligence checks to ensure that the software is making the correct calculations.

If you have been approached by the Pensions Ombudsman or the Pensions Regulator, or have any general queries about your auto-enrolment obligations, please contact Billy Richards, Alice Kinder or Doug Mullen.