Out-Law News 2 min. read

Pensions Regulator fines first employers for breaches of automatic enrolment duties

The amount of enforcement action taken against employers for non-compliance with their automatic enrolment duties rose considerably in September, according to the Pensions Regulator, which has also recently issued its first fines for breaches.

According to its latest quarterly report (8-page / 89KB PDF), the regulator issued 163 compliance notices and three fixed penalty fines between July and September this year. The period coincided with a "significant rise" in the number of employers subject to the regime, after thousands of medium-sized employers with between 150 and 250 staff began enrolling their workers into qualifying workplace pension schemes in April.

Charles Counsell, head of automatic enrolment at the regulator, said that small and micro-employers that were not yet subject to the requirements should check their 'staging dates' now and prepare early.

"We know most employers want to do the right thing and comply with the law," he said. "Where we take enforcement action by issuing a compliance notice, this gives employers the necessary wake-up call to provide the pensions their employees are due."

"As we deal with smaller employers, we will see more who, despite our message to prepare early, leave it too late or do not comply at all. This type of non-compliance is not acceptable … More than 1.25 million employers need to comply with their new workplace pensions over the next three years. For all these employers it is vital that they find out their staging date now, and plan early to ensure that they are ready in time," he said.

Automatic enrolment began for the largest employers in October 2012, and will ultimately result in up to 11 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 automatically enrolled workers that do not opt out of the scheme.

Powers available to the Pensions Regulator to enforce employer compliance with their duties under the regime include the ability to carry out inspections; and issue statutory notices, fixed penalties and escalating fines of up to £10,000 per day. The latest report showed that the regulator had only issued 14 compliance notices, giving employers a deadline within which to take a certain action, up to the end of June 2014. It had issued 177 such notices up to the end of September, as well as three £400 fixed penalties for failure to comply with such a notice.

The report also highlighted the regulator's recent awareness-raising work targeting small and micro-employers, some of which only employ one or two workers. Research conducted by the regulator into employer awareness, as well as calls to its contact centres, have shown that some of these employers still do not realise that the law applies to them, it said.

Pensions expert Simon Tyler of Pinsent Masons, the law firm behind Out-Law.com, said that it was unsurprising to see more problems emerge as smaller employers became subject to the automatic enrolment rules.

"There are large numbers of small employers, and they don't have the same resources as the larger employers to spend on getting auto-enrolment sorted out," he said.

"For auto-enrolment to be a success, the Pensions Regulator needs to do all it can to make sure employers are aware of what is required, and of the importance of taking action early. Fines can help to ensure employers take their duties seriously, but it is far more important to try to prevent problems arising in the first place," he said.

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