Two years on from the beginning of the automatic enrolment regime, and The Pensions Regulator has been buoyed by the high level of engagement from employers and employees alike. It has confirmed that, as at the end of September, over 4.7 million workers have been automatically enrolled into a pension scheme, with some 33,000 businesses having met their legal duties to provide access to a compliant pension arrangement.
The news has not been entirely positive, however. A widely-reported survey by Barclays Corporate and Employer Solutions suggests that, while decision-makers in small and medium sized businesses are more informed and engaged on auto-enrolment than before – with 75% of them preferring to research or implement auto-enrolment themselves – a significant proportion have not yet considered how to implement auto-enrolment within their business. Indeed, nearly one in three Scottish firms surveyed fell into this category: the highest proportion of all the regions in the UK. Furthermore, throughout the UK, 29% of respondents to the survey did not know their staging date.
On top of that, the Regulator's latest quarterly compliance and enforcement bulletin confirms that, for the first time, it has issued fixed penalty notices for non-compliance with auto-enrolment requirements. Three fines of £400 each have been issued for failure to comply either with an Unpaid Contributions Notice or with a Compliance Notice. In addition, the number of Compliance Notices issued in the last three months has increased more than tenfold, from 17 to 177.
We have seen a growing level of engagement from SME clients regarding their auto-enrolment obligations, but it is clear that many Scottish firms are inadequately prepared. Most employers with fewer than 50 people in their largest PAYE scheme will, depending on their PAYE reference number, reach their staging dates between 1 June 2015 and 1 April 2017 – some may have an earlier staging date. If you are an employer and have not already done so, we would urge you to find out your staging date by using the tool on the Pensions Regulator's website.
In related news, the DWP has published a consultation on the earnings trigger and qualifying earnings figures for auto-enrolment. The consultation is open until 25 November, and proposes to retain the upper and lower National Insurance earnings limits as the relevant earnings amounts for auto-enrolment, and also sets out the following four options for calculating the earnings trigger:
- retain the current £10,000 earnings trigger;
- raise the trigger in line with indexation – either by CPI or by growth in earnings – so as to produce a trigger of (in the case of applying CPI) £10,183;
- raise the trigger to the income tax earnings threshold of £10,500; or
- align the trigger with the Pension Commission's benchmark replacement rate to give an initial trigger of £9,876.
Our message on auto-enrolment is not to leave it too late to start planning, as the process will likely take several months to implement. Failure to comply with regulatory requirements may ultimately result in penalties of up to £10,000 per day.