HM Revenue & Customs has ordered around 40 employers to find a new auto-enrolment provider after discovering schemes were not tax-approved.
HMRC stepped in after compliance checks found some schemes run by Source Pensions did not have tax-approved status, the Telegraph reports.
Around 40 firms have been given three months to move employees’ pension savings to an alternative scheme. Tax relief already accrued will be retained because HMRC says employers acted in good faith.
A Source Pensions spokesman says: “Unfortunately some Source Pensions clients’ schemes had not received tax-approved status from HMRC prior to contributions commencing.
“We are in dialogue with HMRC about a possible solution to this regrettable situation.”
An HMRC spokeswoman says: “We don’t discuss identifiable cases. For a pension scheme to receive tax relief, it must be registered with HMRC. For each of the employers affected, the scheme administrator for the pension scheme failed to complete the HMRC pension scheme registration process correctly.
“In these cases, we won’t take action to recover the tax relief provided incorrectly under an unregistered scheme as employers and employees were trying to comply with their legal obligations.
“Employers must find another HMRC registered pension scheme to transfer accrued benefits in to. This will put the employees back into the exact position they should have been, had their current pension scheme been correctly registered.”
Over a million small firms are due to hit their auto-enrolment staging dates over the new two years.
Traditional life companies have shied away from providing auto-enrolment to small employers and have imposed minimum requirements.
But Government-backed scheme Nest and rival mastertrusts The People’s Pension and Now: Pensions say they are open to any employer.