The Pensions Ombudsman has ordered Sheffield manufacturer M&G Olympic Products to compensate two former employees – whom the company had made redundant – over missing pension contributions.
Mr P and Mr Y are both to receive £1,000 in compensation, along with the restoration of missing contributions, which amounted to £2,246.80 and £1,433.25, respectively.
The pair submitted applications to the ombudsman at the start of 2022. They were both made redundant on April 29 2022, following their submissions to the ombudsman.
“The employer’s failure to pay employee and employer contributions into the plan amounts to unjust enrichment,” Pensions Ombudsman Anthony Arter said of both cases.
The employer’s failure to pay employee and employer contributions into the plan amounts to unjust enrichment
Anthony Arter, Pensions Ombudsman
‘A choice between contributions or redundancies’
Mr Y began his employment with M&G Olympic Products in May 2012. He joined the company’s pension scheme – held with Royal London – at the start of 2019, and initially contributions were paid on time.
Contributions began to be paid late in July 2020, and in December that year the November employee contribution was paid in, without the corresponding employer contribution. This pattern continued from December 2020.
In May 2021, the company verbally told its employees that contributions would be brought up to date by the end of July. It was then chased for an update on outstanding contributions on September 13.
The following day, M&G Olympic Products said that “the business had suffered from poor management of client accounts and cash flow and it had taken steps to limit the impact on the business”, according to the ombudsman’s decision.
“It said the choice was between paying wages and pension contributions or making people redundant. The employer also stated that the outstanding contributions were the highest priority and that a payment plan was being worked on with the pension authorities.”
Despite this assurance, Mr Y’s outstanding contributions remained unpaid. He left the plan in February 2022 and submitted a complaint to the Pensions Ombudsman in March.
In April, Mr Y was made redundant. In June, the company told the ombudsman that it was “in the process of evaluating the company in order to ascertain the best steps to take going forward”. It stated that it is unlikely the business will be able to continue trading.
The ombudsman sought a response from the company over Mr P’s complaint – which it had received in January – on two occasions in July. The company did not respond in either instance.
Mr P had also had contributions deducted from his salary without the corresponding employer payments. The last payment was made in July 2021, relating to employer contributions for December 2020. In February 2022, he opted out of the plan and was made redundant in April.
‘Serious distress and inconvenience’
The caseworkers for Mr Y and Mr P sided with the plaintiffs and awarded compensation of £1,000 to both. The ombudsman was subsequently contacted by M&G Olympic Products’ company director, who had bought the company.
The director said that he had not received any information about the pension plan, and that it was unlikely that the company would continue to trade. The employer did not accept the caseworkers’ opinions, leading the complaints to be referred to the Pensions Ombudsman.
Arter backed the caseworkers’ judgments and said that in both cases, the employer’s failure to pay employee and employer contributions into the plan amounted to unjust enrichment, causing both men to suffer financial loss.
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The £1,000 awards for distress were exacerbated by the way the company communicated with the ombudsman in both cases, Arter added.
The pair should receive their compensation payments within 28 days of the rulings – which were reached on December 1 for Mr P and November 30 for Mr Y – and the company should also produce contribution schedules for both within this window.
Within a fortnight of the former employees accepting these schedules, the company will pay their missing contributions and make up for any cost in purchasing additional units required by the late payment of contributions.
