The government is missing out on £40m by not recovering debts owed from individuals and businesses who have failed to comply with their pensions’ obligations, according to Clyde & Co.

This is despite enforcement actions by The Pensions Regulator (TPR) increasing by 26 per cent year-on-year to a record 128,807, as of 31 March 2019.

Clyde & Co’s research found that the recovery rate against recoverable debt is just 30 per cent.

The total value of TPR’s enforcement actions doubled from 2017/18, reaching £124.6m.

However, just £18.4m of the £62.1m that is recoverable debt was recovered.

Commenting on the findings, Clyde & Co head of pensions, Terry Saeedi, said: "Enforcement activity has increased rapidly in recent years and employers should take note of this activity.

“With all political parties pledging funding boosts on the campaign trail, it is clear that better recovery could enable them to keep some of their promises.

"Whatever the colour of the new government, it is likely to grant strengthened powers to the regulator to take action against irresponsible employers.

“As the value of fines continues to increase, we can expect the regulator to look at ways to improve the collection of outstanding debts if the recovery rate does not improve."

All businesses are required to enrol all eligible employees into a pension scheme or face action from TPR, with failures to comply leading to fines of up to £10,000 per day.

Although their occurrence fell by 4 per cent, compliance notices issues were the most commonly used enforcement action, with 58,285 handed out in total.

The biggest increase was in unpaid contributions notices, which increased fourfold.

Saeedi continued: "Seven years after the introduction of auto-enrolment, employees are becoming increasingly aware of their rights. The sharp rise in the number of whistleblowing reports received by the regulator shows that these, too, put pressure on employers to comply with their obligations.

"Failure to comply with the obligations after having received a compliance notice can result in a hefty daily fine, which can have significant consequences for smaller companies, who often struggle to implement the necessary changes as many do not have HR departments."

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