Ombudsman orders law firm to pay thousands in missing contributions

The complaint was brought by Mr L, who alleged that Integral had deducted pension contributions from his pay but had failed to pay into his scheme, the Smart Pension Master Trust.

He said that the missing contributions totalled £2,388.

The employer’s failure to pay employee and employer contributions into the trust amounts to unjust enrichment and has caused Mr L to suffer a financial loss

Anthony Arter, Pensions Ombudsman

Mr L joined the company in 2019 and was enrolled into the master trust later that year, at which point salary deductions commenced. 

He left Integral in 2020, whereupon he tried to consolidate his pension funds into his new workplace pension scheme. But when he logged into his account, he found that the balance was zero, while £1,965.04 was labelled as “processing”.

Mr L queried the figures with the trust administrator. In July 2021, he was informed that Integral had not paid contributions to the trust, and that the administrator had raised the matter with the Pensions Regulator.

He then spoke with TPR directly and was advised to lodge a complaint with the Pensions Ombudsman. The ombudsman told him he should first complain to Integral, which he did that same day, but, even after chasing it for a response in both July and August that year, he heard nothing back — leading to his eventual complaint to the ombudsman.

Mr L provided the ombudsman with copies of his payslips, detailing contributions supposedly deducted from his pay and paid by his employer, amounting to £2,388.

The ombudsman wrote to Integral in both May and June 2022, but received no response.

The case was then considered by the ombudsman’s adjudicator, who concluded that the employer had indeed failed to remit contributions due to the trust.

He noted that though the ombudsman’s normal approach is to try and find agreement between the two parties on the facts of the case, Integral’s failure to respond to questions meant he could only go by Mr L’s account.

He said he had no reason to doubt Mr L’s version of events, concluding that contributions had been deducted and not paid, while employer contributions were also missing, leaving Mr L in a worse financial position than he should have been in. 

This constituted maladministration and caused Mr L significant distress and inconvenience, leading to the adjudicator’s recommendation that a £500 fine be imposed.

Integral once again failed to respond, and so the case found its way to the ombudsman, Anthony Arter.

Compensation fine doubled

Arter concurred with the adjudicator in finding that the available evidence suggested employee contributions were deducted but withheld by the employer. Not only did the employer fail to rectify this, it also failed to engage either with Mr L or the ombudsman’s office and had not responded to the adjudicator’s opinion.

“The employer’s failure to pay employee and employer contributions into the trust amounts to unjust enrichment and has caused Mr L to suffer a financial loss,” Arter wrote. 

“The employer shall take remedial action to put this right.”

He agreed with the adjudicator that Mr L was entitled to compensation for the distress and inconvenience caused, and the “ongoing non-financial injustice which he has suffered”.

He added, however, that Integral’s failure to respond during the investigation had exacerbated matters, leading him to increase the compensation payment from £500 to £1,000.

Arter ordered that Integral should make the £1,000 payment within 28 days, and produce a schedule showing employee contributions deducted from Mr L’s pay during his period of employment. It should also include the employer contributions due to the trust.

Once drafted, the schedule should be sent to Mr L, following which — and within 14 days of a request from Mr L — it should “provide him with any reasonable information in order for him to be able to check the details in the schedule”, Arter continued.

Once Mr L confirms that he agrees with the information in the schedule, Integral will have 14 days to pay the missing contributions to the trust. It should also establish with Smart Pension whether the late payment of contributions led to fewer units being purchased in Mr L’s account than he would otherwise have had, had the contributions been paid on time. 

Integral is also required to pay any administration fee Smart Pension charges to carry out that calculation.

Finally, within 14 days of confirmation from Smart of a shortfall in units, Integral must pay the cost of purchasing any additional units needed to make up the shortfall.