Auto-enrolment: A shift in Regulator focus
The Pensions Regulator has recently published its fourth edition of 'Automatic enrolment: Commentary and Analysis' and also the quarterly bulletin to 30 June 2016. Below are some of the main points and commentary.
By the end of March 2016, more than 6.1 million workers had been successfully automatically enrolled since the reforms came in to place in 2012. Compliance levels among all employers appeared high; more than 95% of the first group of small and micro employers (1-49 employees) who were required to complete their duties look to have complied with the law.
This year has been a pivotal one for auto-enrolment as it marked the point where the focus has shifted on to the small and micro employers. This has provided some new challenges as these employers were likely to be the least prepared, have less knowledge around pensions and it was also evident that there would be substantially less support from providers in the industry when compared with the larger firm.
Some of the statistics from the report are discussed below. Overall, the statistics suggest that pension saving is now becoming the norm.
By March 2016, 66% of UK employees were in a workplace pension scheme. The average pension contributions, however, have reduced. While more employees are in pensions, the contributions are lower than what would be required to secure a good level of retirement savings. Most companies (57%) still left to stage are micro-employers (1-4 workers).
In 86% of compliance cases taken up by the Pensions Regulator, it was necessary for the Regulator to use its formal powers – between April 2015 and March 2016 this was on 8,812 occasions (6,643 more times than the previous year!) Notably, 53% of concerns raised by whistleblowers were in relation to late or missing contributions.
The number of fines being issued continues to increase substantially each quarter. For the quarter ending in June 2016, the following powers were used:
- 3,392 compliance notices
- 177 unpaid contribution notices
- 15 statutory demands for information
- 6 statutory inspection notices
- 861 fixed penalty notices
- 38 escalating penalty notices (fines that can apply on a daily basis. For example, £500 per day for companies with 5 - 49 workers.) This is almost 25% of all escalating penalty notices issued since 2012, showing that the majority have applied to smaller employers.
To date, well publicised compliance examples have been made of Dunelm Furnishing and Swindon Town Football Club. However, further case studies which were released by the Regulator included a small independent garage owner who had been let down by the junior member of staff tasked with their compliance and also a small independent travel agent who had mistakenly assumed the regulations did not apply to them as they only had one employee and had not expected their Staging Date to be so soon. Neither of these situations were deemed a reasonable excuse.
Interestingly, the Regulator produced some commentary around the main reasons for non-compliance. These included employers not "realising they were employers" (despite receiving letters from the Regulator) or believing that they had completed their Declaration of Compliance when all they had done was register for Government Gateway. Other excuses included business difficulties, ill-health or other difficult personal circumstances and also those employers who believed the job of compliance sat with someone else in the business or their business adviser.
Some employers have appealed the Regulator's compliance actions, however, to date, none of the appeals that have ended up in front of a judge have been successful.
It remains vital that employers don't underestimate the work involved and take action to become compliant sooner, rather than later.
Auto-enrolment solution by Aon
About the author
Clare Abrahams is a qualified actuary and Head of Auto-enrolment for Aon Employee Benefits. As part of
her role, she has been involved in developing auto-enrolment solutions for both large and small clients,
including the creation of Littleblue2go, a solution for the SME market which incorporates a market
leading pension scheme with the support required in becoming auto-enrolment compliant.
About the company
ICAS have an agreement with Aon Consulting Ltd to provide their Littleblue2go streamlined auto-enrolment solution at a discounted rate. For details on the Littleblue solution - which Aon is offering to members at a discounted rate - go to icas.com and search tor “Littleblue2go”.
Aon Consulting Limited is authorised and regulated by the Financial Conduct Authority.
This blog is one of a series of articles from our commercial partners.
The views expressed are those of the author and not necessarily those of ICAS.