The Pensions Regulator (“tPR”) has published its first auto-enrolment section 89 report, highlighting key points for employers to ensure compliance with employer duties under the auto-enrolment legislation.
The report, which was the first such report to be issued under section 89 of the Pensions Act 2004, concerns high street retailer Dunelm Soft Furnishings Ltd (“Dunelm”), which failed to complete its auto-enrolment registration with tPR by the relevant deadline of 31 July 2013 in accordance with their auto-enrolment staging date of 1 April 2013. Dunelm were contacted by tPR and given a number of opportunities to comply with their duties and complete registration. However, they did not do so and tPR subsequently issued a compliance notice in August 2013 under section 35 of the Pension Act 2008, requiring Dunelm to complete registration.
Following their eventual registration on 15 August 2013, tPR received further information about Dunelm which led them to believe that the company may have failed to comply in every respect with its auto-enrolment duties. tPR therefore elected to carry out an inspection of Dunelm's premises under section 74(A1) of the Pensions Act 2004. The search led them to discover a number of issues with Dunelm’s auto-enrolment process, including:
- That certain members had been automatically enrolled late, some up to three months so, and as a result of the late enrolment of some employees, Dunelm had failed to pay a significant level of contributions that ought to have been made.
- It was also evident that these issues existed and were known to the company before registration, and therefore the data submitted by Dunelm to tPR was inaccurate in places. Consequently, the declaration indicating compliance with employer duties was wrong. There were a number of issues and factors that contributed to the difficulties Dunelm experienced, including its payroll system which proved to be ineffective for auto-enrolment; key personnel leaving at critical points in the auto-enrolment timeline; and data quality issues. There were also questions asked as to whether senior staff at Dunelm were aware of the compliance notice having been served by tPR.
The Regulator engaged with Dunelm to resolve the difficulties they were facing in terms of system inadequacies, lack of personnel knowledge of the process and the quality of data and the company were willing to cooperate. However, Dunelm had a very large amount of pension contributions outstanding (£108,000 in all) and in order to protect members' benefits, tPR also chose to issue an unpaid contributions notice directing Dunelm to make good the contributions owed.
Dunelm has now complied with the terms of all orders and stipulations of tPR and the outstanding contributions balance has been settled. The section 89 report confirms that Dunelm is now fully compliant with its auto-enrolment duties.
The issues and difficulties faced by Dunelm in complying with their auto-enrolment obligations and the consequences of their failings, should serve as a warning to other employers. It highlights the importance of ensuring that sufficient time is allowed for preparation of auto-enrolling a work force. This case has shown the importance of having well trained and consistent personnel responsible for managing the auto-enrolment process and keeping senior staff aware of activity. Software and systems also proved to be a hindrance to compliance here, thus sufficient time ought to be allocated to test such programmes well before the relevant staging date.
As well as bringing to the fore key steps and precautions for employers nearing a staging date, the Dunelm case has demonstrated that tPR is taking their enforcement duties seriously. They are clearly willing and able to engage directly with employers who fail to meet the standard expected of them when it comes to auto-enrolment. It is certainly also worth noting that tPR did not choose to enforce a fine in this case, despite this being an option available to them. The reason for this was, most likely, due to the fact that Dunelm were prepared to openly and frankly engage with tPR and cooperate in ensuring their eventual compliance.