More firms facing fines for automatic enrolment non-compliance, says Pensions Regulator

Out-Law News | 30 Jan 2015 | 11:20 am | 2 min. read

The number of fixed penalty fines issued to UK employers for breaches of new workplace pension rules increased dramatically in the last three months of last year, in line with the increasing number of firms becoming subject to the new regime.

According to its latest automatic enrolment compliance report (8-page / 89KB PDF), the Pensions Regulator issued 166 fines of £400 between October and December 2014, compared to just three between July and September. It also issued 1,139 compliance notices over the same period, instructing employers to remedy a breach or risk a fine or further action; compared to 163 over the previous three months.

The Pensions Regulator's automatic enrolment director, Charles Counsell, said that he expected more fines to follow over the next few months as more small employers reached their deadline for notifying the regulator that they had put the new rules in place. A significant number of notices sent out towards the end of 2014 were to employers that had missed this deadline, which comes five months after the 'staging date' when the rules come into force for that employer, he said.

"My message to all employers is that failing to declare within five months of your staging date means you risk being fined, which is why we recommend you start your automatic enrolment planning and preparation 12 months before staging," he said.

"With the mass market roll-out of automatic enrolment to large numbers of small businesses in the coming months, we expect to see an increase in how often we need to use our powers. The vast majority of employers complete their duties on or ahead of time, but we are seeing a small minority that require the additional nudge of a notice from the Pensions Regulator," he said.

The Pensions Regulator recommends that employers begin gathering the information that they need to complete the 'declaration of compliance' well in advance of their deadline. It has also conducted research showing that most of the employers that have completed the process to date regretted not allowing more time.

The regulator said, however, that the vast majority of employers had complied with their reporting requirements. Approximately 30,000 medium-sized firms with staging dates between April and July had reached their compliance deadline by the beginning of December, it said.

Automatic enrolment began for the largest employers in October 2012, and will ultimately result in up to 10 million people saving more towards their retirement or saving for the first time. Under the programme, more than 1.3 million employers will have to automatically enrol workers into a pension scheme which meets certain minimum requirements, and will be legally obliged to make contributions towards the pensions of workers that do not opt out of the scheme once enrolled.

Pensions expert Tom Barton of Pinsent Masons, the law firm behind Out-Law.com, said that increased scrutiny by the regulator could also uncover other poor practices by firms, such as issues with salary sacrifice or unilateral changes to contribution rates.

"These are employment contract issues which employers need to get right in order to avoid claims and challenges by the workforce and even from HMRC," he said.

"Strict compliance with auto-enrolment is difficult for employers, especially those who are new to pensions. Particularly where employers employ workers other than on regular hours and on a monthly payroll, there are any number of pitfalls. It takes time, cost and third party support to get things off the ground in compliant fashion. Clearly the regulator has found examples of non-compliance which it considers a threat to policy objectives," he said.