Making AE Work – The Pensions Regulator issues fixed penalties of £400.

It has been over two years since the first employers automatically enrolled their eligible workers in to a work place pension scheme and in that time more than 4.7 million workers have been enrolled by over 33,000 large and medium employers.

Over the next three years all employers who employ at least one member of staff will need to consider their obligations and in most cases will need to provide a workplace pension for its workers. These obligations apply to more than 1.25 million employers.

The Role of the Pensions Regulator

To date the Pensions Regulator has policed the introduction of automatic enrolment with a “soft touch” providing a good deal of advice and support to those employers who have shown a commitment to making auto enrolment work. However, it is increasingly apparent that a number of employers are either unaware of their obligations, do not give themselves sufficient time to prepare or in a number of rare cases look to avoid compliance.

The Pensions Regulator has stated that non- compliance is not acceptable and that it will use a range of powers at its disposal to tackle this issue. As at 30 September 2014, the Pensions Regulator has issued 177 compliance notices to employers, inspected the premises of 6 employers and has handed out it first fixed penalty notices of £400 to three employers for failing to meet their automatic enrolment duties.  It also has the power to serve escalating penalty notices of between £50 per day for employers with one to four workers, rising to £10,000 for employers with over 500 workers.

To overcome the misunderstanding held by some small employers that automatic enrolment legislation does not apply to them a new advertising campaign titled “Act now It’s the law” has been launched by the Pensions Regulator.

Our Experience

We have advised many employers who have commenced auto enrolment on both pensions and employment law and the key factors, to make this process as smooth as possible and to take away the pain, are as follows:

  • give yourself plenty of time to prepare for auto enrolment – a minimum of six months is recommended
  • do not to assume that your existing pension scheme or your pension provider will meet your requirements for the purpose of the auto enrolment legislation
  • understand that you do not have to enrol all employees; however, checking those who do not qualify may prove difficult
  • decide early if you need assistance and seek professional help if you do
  • check your employment contracts to confirm existing pension commitment
  • ensure that your payroll system is compatible with the demands of automatic enrolment
  • communicate the changes to your employees sooner than later.

Where employers have followed these steps auto-enrolment has progressed smoothly and with the odd exception the administration processes are working well.

David Loosemore comments,

“With early planning and the assistance of professional advisors it is a relatively straightforward process, in most cases, for an employer to comply with their duties under the auto enrolment legislation. The key factors for an employer is to act early, to understand what support is necessary bearing in mind that its existing service providers may not be prepared for auto enrolment and to factor in the set up and on going costs of auto enrolment in to its business model. The exercise is an ideal opportunity to rationalise existing pension commitments potentially saving money in the process and to use pension benefits as a motivational tool with workers.”