The Pensions Regulator (the “Regulator”) could have the power, under current UK pensions legislation, to enter the private homes of employees who are working from home. The current law, which has been in force since 2005, could allow the Regulator to enter some premises at any reasonable time, to gather information during some limited statutory investigations. Though these are currently limited, the Regulator will soon have its inspection and information gathering powers extended by the Pensions Schemes Act 2021 due to come into force in Autumn 2021. After the switch to home working in 2020 as a result of the pandemic, many companies are considering permanent shifts to home working. We have assessed what this means for the Regulator’s powers to enter the homes of employees.

The Regulator already has the power to enter a premises where they have reasonable grounds to believe that the premises houses electronic or physical documents, which could further an investigation into non-compliance with automatic enrolment obligations. Automatic enrolment obligations require every employer to provide a pension to all eligible employees unless they opt out. There are also other grounds for Regulator inspection that relate to the administration of a pension scheme that should be of concern for scheme administrators and trustee companies. Homes are exempted from inspection, but this exemption only applies where the dwelling is not being used by the occupier for the purposes of a trade or business. This could allow employees of employers, scheme administrators and trustee companies, as well as individual trustees, to be within the scope of the power if they are working from home and taking documents or a work laptop home to do so.

The Regulator was previously unlikely to have needed to inspect the homes of employees as very few people worked from home with any regularity. The Regulator’s figures reveal that it has only inspected 6 premises using these powers so far. However, the world of work has changed during the pandemic. Home working became the norm for many employers, administrators and trustees. Many people are still working from home full-time and taking documents and computers home to do so. Although this continued use of homes for trade or business is enforced by government regulations, it doesn’t change the fact that, were the Regulator to need to use its powers to inspect, it may need to do so in people’s homes because that is where some files are now located.

The Pension Schemes Act 2021 (the “PSA”) will widen the powers of the Regulator, and one of the powers it will widen is the power to enter premises. The likelihood of inspection of premises being necessary to enforce automatic enrolment compliance is very low for most employers, trustee companies or pension scheme administrators. However, the likelihood of inspection for investigations relating to “moral hazard” powers is a lot higher and that is what the PSA will widen: the Regulator’s inspection power to cover.

The Regulator’s moral hazard powers are powers that enable it to require third parties to pay money into a UK defined benefits scheme following a period of investigation. These are key anti-avoidance powers which the Regulator can use to target any person or company who is connected and/or associated with the scheme employer(s). It can require such an entity to comply with a Contribution Notice (a notice that requires money to be paid into the pension scheme where the Regulator reasonably determines that a scheme has been put at risk by any corporate activity in the past 6 years). For employees of defined benefit scheme employers and those involved with the trusteeship and/or administration of defined benefit pension schemes, this widening of the power to inspect in relation to moral hazard powers could mean that their homes are within the scope of the power.

Employers, scheme administrators and trustee companies might want to review the policies that they have in place which govern employees taking documents and work computers home. If new, more robust policies are required, they ought to be put in place. It may also be advisable to have systems which record the location of scheme documents and work laptops so that, in the event that the Regulator requires inspection of such information, the request can be complied with, negating any potential need for a Regulator home visit.

Employers, scheme administrators and trustee companies may also want to appraise their employees of these widened Regulator powers and the importance of complying with Regulator requests for information. That way, their employees will be aware of the potential right the Regulator has to enter their home to gather information, and the fact that it could be a criminal offence if they were to intentionally destroy or conceal relevant documents.

Read Anne-Marie and Danyal’s article in Professional in Payroll, Pensions and Reward.