Guest comment: Mixed messages as TPR announces end of Covid easement for payment failures

By way of background, DC schemes are under a statutory obligation to report pension contribution failures that are of "material significance to TPR in the exercise of its functions". TPR's Codes of Practice 5 and 6 (the COPS) clarify what it considers to be of “material significance” for these purposes. One such failure is where contributions have been outstanding for 90 days.

As part of its Covid response, TPR announced a temporary easement to this part of the COPS in April; extending the 90 day period to 150 days. TPR stated that this gave “struggling employers more time to work with pension providers to bring late or missing payments up to date before enforcement action was taken”.

TPR has now signalled the end of this easement. However, at the time of writing, the way in which the easement operates and how it is going to end is difficult to interpret from the short announcement on TPR’s website.

First, TPR asks providers and trustees to report payment failures that are 90 days outstanding from 1 January 2021 but this will only become mandatory on 1 April 2021. It also states it is giving schemes three months to make adjustments to their processes in light of this return to ‘business as usual’.

Some clarification of these statements would help. For example does TPR consider that the three -month adjustment period starts on 1 January 2021 (or does it start now)? Would a failure to notify a payment that is 130 days outstanding on 1 February 2021 lead to enforcement action?

Second, TPR points out that the easement “only ever applied to payment failures that were material because they were outstanding for a certain period” and that “providers should continue to report…any other payments failures as set out in the [COPS]”.

This quick line at the end of the statement needs to be considered carefully by trustees and providers who may have been under the impression that the 150 day easement had no strings attached. The reality is that the outstanding contribution period is one among a number of other payment failure scenarios in the COPS. The other scenarios, which remain reportable, include where:

- there are concerns that the employer is retaining and using contributions to assist cash flow difficulties;

- the employer is not willing to pay the outstanding contributions (this may be assumed where a reminder and recovery process has been exhausted without response from the employer or without obtaining the payment); and

- there are repetitive and regular payment failures which indicate inadequate systems or procedures to ensure correct and timely payment of contributions.

These might give rise to some testing questions for trustees and providers. For example:

- in the current business environment, how easy will it be to conclude that a sustained payment failure is unrelated to cash flow problems?;

- assuming a payment failure is identified shortly after it arises, is it reasonable to assume that a reminder and recovery process could go on for up to 150 days?; and

- might one assume that missing two or three monthly contribution payments in succession constitutes a repetitive and regular payment failure that needs to be reported?

Without additional clarification of its announcement, an avalanche of payment failure reports might be coming TPR’s way.

    Share Story:

Recent Stories


Responsible investing
Laura Blows speaks to Standard Life head of investment solutions, Gareth Trainor, about the latest responsible investment trends and developments for providers, pension schemes and their members
ESG and member engagement
Laura Blows speaks to Legal &General Investment Management head of DC, Emma Douglas, and Nest Insight Director of Research and Innovation, Jo Phillips, about member attitudes towards ESG and how this may impact upon pension fund investments