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04

Employers' late payments into pension schemes 'up 35%'

Open-access content Monday 15th April 2013

The number of late payments made by employers into their company pension schemes increased by more than a third last year, according to research published by Pinsent Masons today.

The law firm's analysis shows that the number of late payments by employers which were flagged with The Pensions Regulator last year totalled 9,172 - a 35% increase on the 6,787 recorded in 2011.

Trustees of pension schemes are required to inform the regulator when contributions are received late, particularly if they remain unpaid after 90 days and are of 'material significance'.

Last year's late payment notifications figure exceeded the number of delays to pension payments at the height of the credit crunch, Pinsent Masons noted.

The firm claimed that the increase in late payments could signal an impending wave of company restructurings and insolvencies.

Jamie White, partner and head of restructuring at the law firm, said: 'Time and again we have seen in insolvency proceedings that when companies are in distress pension payments are deferred or not paid at all in an attempt to free up cash. This can buy time but creates - or adds to - a deficit while the business tries to trade its way out of trouble.'

White added that while some of the increase could be attributed to the higher profile of the regulator and improved compliance by industry - and in particular the insurance companies administering schemes - the trend still raised 'real concerns'.

He noted that, while the Pension Protection Fund was there to protect scheme members when an employer entered difficulties, a flood of insolvencies could put pressure on its resources.

'A "lifeboat" fund does exist to support pensioners where schemes have failed, but if we do see large-scale insolvencies there will be questions around the level of support available,' he added.

This article appeared in our April 2013 issue of The Actuary.
Click here to view this issue
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Topics:
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