Employer's Pension Penalty Reduced After Tribunal Finds Regulator's Evidence Unreliable

NCN: [2026] UKFTT 00949 (GRC) Case Reference: FT/PEN/2024/0284 First-tier Tribunal (General Regulatory Chamber) Information Rights Heard on: 13 February 2026 Decision given on: 25 June 2026 Before JUDGE PERI MORNINGTON Between Involved social impact projects ltd Appellant and THE PENSIONS REGULATOR Respondent Decision: The appeal is allowed in part. The Fixed Penalty Notice of £400 is upheld. The Escalating Penalty Notice is varied so that the daily rate is reduced from £500 to £50. The total amount payable is to be recalculated accordingly. REASONS 1. This is an appeal by Involved Social Impact Projects Ltd (“the Appellant”) against a Fixed Penalty Notice in the sum of £400 dated 28 December 2023 and an Escalating Penalty Notice dated 29 January 2024 issued by The Pensions Regulator (“the Respondent”) pursuant to the Pensions Act 2008 .

2. The Appellant does not dispute that it failed to comply with its statutory obligations in respect of unpaid pension contributions and the requirements of an Unpaid Contributions Notice. The principal issue for determination is whether the Escalating Penalty Notice was correctly calculated, and in particular whether the Respondent was entitled to apply a daily rate of £500. Background 3. On 30 October 2023 the Respondent issued an Unpaid Contributions Notice (“UCN”) under sections 37 and 38 of the Pensions Act 2008 requiring the Appellant to calculate unpaid contributions, pay those contributions to the pension scheme provider, and provide evidence of compliance by 11 December 2023.

4. The Appellant did not comply with the UCN. As a consequence, a Fixed Penalty Notice (“FPN”) of £400 was issued on 28 December 2023. The Appellant’s continued non-compliance resulted in the issue of an Escalating Penalty Notice (“EPN”) on 29 January 2024.

5. The EPN provided for a daily penalty of £500, being the rate applicable where the number of persons affected falls within the 5 to 49 band under Regulation 13 of the Employers’ Duties (Registration and Compliance) Regulations 2010.

6. For these purposes, the term “persons” does not simply refer to the employer’s overall workforce or headcount at a particular time. Rather, Regulation 13 requires the decision-maker to identify the number of workers in respect of whom relevant pension contributions have not been paid on or before the due date. These individuals are often described as “affected members”, meaning those workers who ought to have received contributions into a qualifying pension scheme but in respect of whom the employer has failed to make payment in accordance with its statutory duties. The number of such persons may therefore include current employees, and in some circumstances former employees, where unpaid contributions remain outstanding in relation to them. In determining that number, the Respondent is entitled to rely on the latest information reasonably available to it, including reports provided by a pension scheme such as a late payment report identifying those members for whom contributions have not been received. The Statutory Framework 7. Under section 41 of the Pensions Act 2008 the Respondent may issue an EPN where an employer fails to comply with an UCN.

8. Regulation 13 of the 2010 Regulations governs the level of penalties for non-compliance with an EPN. Where the failure relates to an UCN, Regulation 13(2)(c) applies.

9. Regulation 13 provides that the daily rate is to be determined by reference to the number of persons and that, in this context, the relevant number is the number of workers in respect of whom contributions have not been paid on time.

10. Regulation 13 further provides that the Respondent may rely on the latest information reasonably available to it, including reports from a pension provider.

11. The prescribed daily rates include £50 where the number of persons is between 1 and 4, and £500 where the number falls between 5 and 49. The Respondent’s Case 12. The Respondent submits that the EPN was properly issued and correctly calculated.

13. It relies on a late payment report provided by NEST, the Appellant’s pension provider, which identified approximately 7 to 8 members in respect of whom pension contributions had not been paid during the period between September 2022 and August 2023.

14. The Respondent submits that the relevant measure is the number of affected members rather than the employer’s headcount and that it was entitled to rely on the NEST data as the latest information reasonably available.

15. The Respondent further submits that the Appellant took no effective steps to reconcile or correct the NEST records and that, accordingly, the daily rate of £500 was correctly applied.

16. The Respondent also submits that any subsequent delay in proceedings or passage of time does not affect the validity of the penalty and that it has no power to revisit the penalty outside the relevant statutory framework. The Appellant’s Case 17. The Appellant accepts that it failed to comply with its statutory obligations but advances arguments in relation to the calculation of the penalty.

18. The Appellant contends that its workforce at the relevant time consisted of no more than one or two employees following a reduction during the COVID period.

19. It submits that the NEST records showing a higher number of affected members are inaccurate or misleading and do not reflect the reality of its workforce.

20. The Appellant further submits that it made repeated attempts to engage with NEST but was unable to resolve the matter due to system failures, including difficulties in establishing or maintaining a direct debit and an inability to obtain assistance from the provider or communicate with them at all.

21. It states that it received only automated communications and was unable to speak to anyone who could resolve the issue.

22. The Appellant also submits that it is willing to make payment of any sums properly due and that it has since moved to a different pension provider through which contributions are now up to date.

23. The Appellant raises a concern as to fairness in relation to the passage of time and the Respondent’s position that discretion can no longer be exercised after a period of approximately 18 months.

24. The Appellant suggested that there were difficulties in collecting post and responding to correspondence due to personal circumstances. However, the Tribunal does not understand the Appellant to contend that the EPN was not properly issued or served. In those circumstances, the Tribunal proceeds on the basis that the statutory notices were received in the ordinary course and were validly issued. Issues for Determination 25. The Tribunal must determine whether the Respondent correctly determined the number of persons for the purposes of Regulation 13, whether the daily rate was correctly applied, and whether there is any basis to cancel or vary the penalty. Findings 26. The Tribunal is satisfied that the Appellant failed to comply with the requirements of the Unpaid Contributions Notice.

27. The Tribunal is further satisfied that the statutory notices, including the Fixed Penalty Notice and the Escalating Penalty Notice, were validly issued.

28. The central issue in the appeal concerns the determination of the number of persons for the purposes of Regulation 13.

29. The Tribunal accepts that the Respondent is entitled, in principle, to rely on information provided by a pension provider, including a late payment report.

30. The Tribunal also accepts that the statutory test is not confined to the number of employees on payroll at a particular time and may include workers in respect of whom contributions remain unpaid.

31. The Appellant’s reliance on headcount alone is therefore insufficient to determine the statutory question.

32. However, the Tribunal must assess whether the Respondent’s reliance on the NEST late payment report provided a sufficiently reliable basis for concluding that the number of affected members fell within the 5 to 49 band.

33. In his evidence, [NAME] for the Appellant stated that the Appellant had no more than one or two employees at the relevant time and that he did not understand why a larger number of individuals appeared on the NEST records.

34. He referred in particular to entries showing individuals with zero contributions and explained that he had assumed that pension information would correspond broadly with PAYE records.

35. The Tribunal accepts that the Appellant may have misunderstood the operation of pension reporting systems and that records may include former employees or individuals whose status requires reconciliation.

36. The Tribunal also accepts the Appellant’s evidence that it experienced significant difficulty in engaging with NEST.

37. The evidence indicates that the Appellant attempted to establish payment arrangements, including direct debit, and attempted to contact NEST through available channels without obtaining meaningful assistance.

38. The Tribunal is satisfied that these difficulties were genuine and materially impeded the Appellant’s ability to resolve the position and to verify or correct the underlying data.

39. The Tribunal notes, however, that the Appellant has not provided a detailed reconciliation identifying which of the individuals recorded by NEST were incorrectly included or in respect of whom no contributions were due.

40. This limits the extent to which the Tribunal can accept the Appellant’s assertion that the relevant number was as low as one or two.

41. Nevertheless, the Tribunal considers that the Respondent’s reliance on the NEST data must be assessed in light of the Appellant’s inability to engage with that system and the absence of any corroborative evidence, such as PAYE records, supporting the higher figure.

42. In circumstances where the underlying data remained unresolved and the Appellant was unable to access or correct it, the Tribunal is not satisfied that the figure of 7 to 8 affected members provides a sufficiently reliable basis for determining the applicable band.

43. The Tribunal concludes that the Respondent has not established, on the balance of probabilities, that the number of persons fell within the 5 to 49 category.

44. In those circumstances, and having regard to all the evidence, the Tribunal finds that the appropriate category is the 1 to 4 persons band.

45. The Tribunal has considered the Appellant’s subsequent steps to regularise its position and its willingness to make payment, but those matters do not affect liability.

46. The Tribunal does not consider that the issue of any internal period for the exercise of discretion by the Respondent alters the Tribunal’s determination of the statutory appeal. Conclusion 47. The Tribunal concludes that the Appellant failed to comply with its statutory duties and that the Escalating Penalty Notice was lawfully issued.

48. However, the Tribunal finds that applicable daily rate is £50 and that the penalty should be recalculated accordingly. Signed: Judge Mornington Date: 19 June 2026