The Pensions Regulator

Code of practice 05
Reporting late payment of contributions to occupational money purchase schemes

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Action on non-receipt of contributions

11. Where trustees identify a late payment, they should take action to obtain any contributions that are still outstanding. They should do this by raising the matter with the employer as soon as practicable.

How sure trustees need to be before reporting

12. Trustees must report to the Pensions Regulator when they have 'reasonable cause to believe' that a late payment is likely to be of material significance to the Pensions Regulator in the exercise of its functions. 'Reasonable cause to believe' means more than an unsubstantiated suspicion. Trustees should therefore satisfy themselves that a late payment of contributions has occurred and that it is material.

Deciding whether to report

13. Trustees should use their judgement to assess whether they need to report to the Pensions Regulator and members, taking account of the points in 14 to 16 below.

    The following section sets out which late payments are likely to be considered material.

Late payments which trustees should report

14. Trustees must report material late payments to the Pensions Regulator and scheme members. Circumstances which are likely to be material and which trustees should report include:
    1. where contributions remain unpaid 90 days after the due date (unless it is a one-off or infrequent administration error, which is discovered after the 90 days, and which is corrected when found or is thereafter corrected as soon as practicable);
    2. where there is a late payment involving possible dishonesty or a misuse of assets or contributions. For example, trustees may have concerns that the employer is using the contributions to alleviate cashflow difficulties;
    3. where there is a failure to pay contributions which carries a criminal penalty. For example, where the employer is knowingly concerned in the fraudulent evasion of the obligation to pay member contributions;
    4. where the trustees become aware that the employer does not have adequate procedures or systems in place to ensure the correct and timely payment of contributions due and appears not to be taking adequate steps to remedy the situation;
    5. where there is no early prospect of outstanding contributions being paid, for example because of the financial circumstances of the employer or for any other reason.

    There is no requirement or expectation that trustees should actively search for circumstances such as those noted in points ii to v above. However, if trustees become aware of any such circumstances they should be reported.

    The above list is illustrative only and is not exhaustive.

Late payments which trustees should not normally report

15. Trustees should not normally report to the Pensions Regulator where one of the following circumstances applies, even if contributions remain unpaid 90 days after the due date:
    1. where there are infrequent late payments and the overdue contributions have now been paid, or arrangements are being put in place for the prompt payment of the overdue amount, for example, an administrative error which is corrected as soon as reasonably practicable and where reasonable steps are being taken to avoid recurrence;
    2. where there is a late payment and there are four or fewer active members in the scheme for whom there are contributions payable under the payment schedule, unless the situations in 14 ii and/or 14 iii above apply;
    3. where there are short periods of lateness of contributions resulting from, for example, members leaving, new members joining, or changes in salary not being notified to trustees;
    4. where a claim has been submitted to the Redundancy Payments Service of the Department of Trade and Industry for the outstanding contributions.

    The above list is illustrative only and is not exhaustive.

16. Trustees may need to report, however, where more than one of the circumstances in 15 above applies, as a combination of minor factors may mean that the late payments become materially significant to the Pensions Regulator.

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