In the words of a great pop band (well, possibly), “Never forget”. We have mentioned the pensions automatic enrolment (auto enrolment) requirements on employers in previous editions of Law at Work. As a brief reminder, what these mean is that employers must automatically enrol their ‘eligible jobholders’ into a qualifying pension scheme and make pension contributions with respect to them. Certain other workers may also have rights to join a pension scheme. Even if those auto-enrolled opt-out, employers are generally required to re-enrol every three years, meaning that automatic enrolment can never stay too far away from the pensions agenda.
Pensions auto enrolment – a refresher
Under pensions legislation was phased in on and from 1 October 2012 (depending, broadly, on the size of the employer’s HMRC PAYE listing as at 1 April 2012), employers are legally obliged to:
- automatically enrol certain workers into pension arrangements and make minimum contributions with respect to those workers; and - provide access to pension arrangements for certain other types of worker.
The date from which these legal requirements first apply to an employer is known as its ‘Staging Date’. Employers who start to make payments of salary under PAYE from 1 April 2012 will have a Staging Date on or after 1 May 2017 (the actual date depending on when those payments start).
The automatic enrolment earnings trigger determines who is eligible to be automatically enrolled by their employer and the qualifying earnings band is the band of earnings used to calculate the minimum contribution levels for money purchase schemes being used for auto enrolment purposes. The minimum of the band is also relevant to defining who can opt in if they earn under the earnings trigger.
For the 2017/18 tax year, the earnings trigger will remain at £10,000 per year, whilst the qualifying earnings bands will increase to £5,876 and £45,000 per year (they were at £5,824 and £43,000 respectively for 2016/17).
The legal obligations are complex and there are a number of options available to employers as to how to comply with them.
The Pensions Regulator, which, amongst other things, is responsible for enforcing auto enrolment has recently announced that it intends to carry out compliance inspections on employers it “judges to be at risk of failing to meet their duties” in relation to auto enrolment and to “investigate non-compliance, help employers get back on track or take enforcement action where necessary.” The Regulator has said that employers are to be given a short notice period before an inspection. Employers subject to inspection will be chosen from a range of sectors, including those it considers are at risk of failing to meet their duties, citing the hospitality and retail sectors as examples.
Although it is not entirely clear which employers would fall under this scrutiny, it does reflect the seriousness with which the Regulator regards compliance with auto enrolment, and that employers need to ensure that they fully understand what their pensions obligations are in relation to their workforce.
Compliance with auto enrolment is an ongoing process and the requirements are complex. They are also ever-evolving (for example, some of the main exemptions from the requirements were only introduced a couple of years ago and the Government is carrying out a review of the auto enrolment regime this year). It is therefore quite possible for there to be areas of difficulty for employers and/or non-compliance. The Pensions Regulator has broad powers in relation to non-compliance, including issuing fines and, ultimately, there are criminal penalties for “wilful” failure to comply.