EC2 Master fined £15,000 for not collecting or investing nearly £900,000 of pension contributions

pension contributions

The Pensions Regulator (TPR) has fined master trust pension scheme trustee EC2 Master, which holds assets for the master trust, £15,000 for failing to collect and invest £888,651.94 worth of pension contributions from 2,115 members.

TPR found in its determination notice, published on Friday 22 June 2018, that EC2 Master did not ensure that the master trust scheme, which is run by Smart Pension, had a proper reporting system in place to comply with statutory requirements.

This meant that Smart Pension failed to notify TPR that 498 employers had not paid outstanding pension contributions between August 2015 and May 2017 and that 2,115 pension scheme members had not been notified of this. Affected members were only informed that their contributions had not been collected and invested after TPR told Smart Pension of its duty to contact members.

Failing to report material payment failures is punishable by a civil penalty under Section 10 of the Pensions Act 1995. Trustees of defined contribution (DC) occupational pension schemes have a legal duty to check that pension contributions are being paid and have processes in place to regulate and monitor this. If contributions are outstanding, trustees must report this to TPR and members with 120 days.

New systems and processes have now been implemented by Smart Pension and EC2 Master.

Nicola Parish, executive director of frontline regulation at TPR, said: “It is vital that [employees] can be confident that their contributions are being collected and invested properly so that their savings can grow. They have a right to know if payments are not being made and we need to know so that we can investigate why it is happening.

“Smart Pension’s systems and processes were ineffective and the trustee’s failure to act on its responsibilities was unacceptable, but we are encouraged by the commitment of both to improving the way they work. We are clear that schemes must have efficient and robust processes in place to protect members’ funds. We will take action where this is not the case.”

Andy Cheseldine, independent chair of trustees at EC2 Master, added: “In its case report, the Regulator said we had been ‘very co-operative in voluntarily providing information and shown progress in quickly fixing the oversights’. In fact, we had fixed these reporting issues within weeks.

“Smart Pension now has a system in place which includes an automated ‘health check’, an algorithm which runs checks every day on every single employer to make sure they are keeping up with their payments.

“We are very grateful to TPR for its acknowledgement of the improvements we have made and our commitment to keep working closely with them. We take our duties very seriously and what happened was not acceptable. However, we are confident that with this new system in place, this will not happen again.

“It is important to remember that nearly all the employers we reported have now paid their lapsed contributions, and that this finding was for a failure to report payments that had been stopped by employers.”