A sharp increase in the number of late payments into company pension schemes by employers could lead to an impending wave of restructuring and insolvencies, international law firm Pinsent Masons has warned.

Data taken from a Freedom of Information request has shown that there has been a 35 per cent increase in late payments over the last year, increasing from 6787 in 2011 to 9172 in 2012. Pinsent Masons stated that the number of late payments recorded was at the highest level in five years.

When employer contributions to a pension scheme are received late, trustees of that scheme are required to inform the Pensions Regulator of this, particularly if contributions remain unpaid after 90 days and are of ‘material significance.’

Pinsent Masons partner and head of restructuring Jamie White 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.

“The latest increase does raise real concerns. A proportion of this increase can be put down to the increased profile and vigilance and improved compliance by industry – and particularly the insurance companies administering the schemes. However those factors alone do not sufficiently explain the trend. The Pensions Regulator stipulates that it should only be notified of late payments if they are of material significance. ”

White concluded by stating that whilst a ‘lifeboat’ fund does exist to help schemes, if the number of insolvencies rapidly increases, then the level of support will be severely tested.

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