Pensions Regulator has used automatic enrolment enforcement powers 23 times, according to new report

Out-Law News | 05 Aug 2014 | 2:58 pm | 2 min. read

The Pensions Regulator used its formal powers to enforce employer compliance with their duties under the automatic enrolment regime another five times in the three months to June 2014, meaning it has now done so 23 times, it has announced.

The details emerged in the first of the regulator's new quarterly compliance and enforcement bulletins (7-page / 90KB PDF), covering the period between April and June 2014. Powers available to the regulator include the ability to carry out inspections and to issue statutory notices, including fixed penalties and escalating fines of up to £10,000 per day.

According to the report, the regulator has used its powers to issue compliance notices to "remedy a contravention of one or more automatic enrolment employer duties" 17 times in total, including three times during the period covered by the report. However, it has not yet issued any £400 fixed penalties for failure to comply with such a notice.

"To date the vast majority of employers are complying with their new workplace pension duties without the regulator needing to use our enforcement powers," said Charles Counsell, executive director of automatic enrolment at the Pensions Regulator.

"I believe this is a testament to the success of our proportionate, risk-based approach to compliance and enforcement … We have provided the tools and assistance that large and medium employers need to ensure millions of workers didn't miss out on the pension contributions they are entitled to. On a small number of occasions, when our intervention has not resulted in the required outcome, we have used our powers to help to ensure employers comply with their duties," he said.

According to the report, the regulator expects to see a "corresponding increase" in the number of times it has to use its statutory powers as more employers reach their automatic enrolment staging dates in the coming months. It said that it would continue to "highlight that there are consequences for those employers who may seek to avoid their statutory obligations" as part of its quarterly reports. By 1 April 2015, all firms with 50 employees or more will have begun the automatic enrolment process.

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.

As part of its report, the regulator highlighted a recent decision by the UK's Supreme Court which could bring certain partners of limited liability partnerships (LLPs) within the scope of the automatic enrolment regime. In May, the Supreme Court ruled that a former fixed-share equity partner of a law firm was a 'worker' for the purposes of whistleblowing laws. Although the case concerned the definition of a worker under the Employment Rights Act (ERA), the Pensions Regulator said that this definition was "very similar" to that of a worker for the purposes of automatic enrolment as set out in the 2008 Pensions Act.

"Our view is that an LLP should assume that the Supreme Court's decision is equally applicable and, as such, members of an LLP could be considered workers for automatic enrolment," the regulator said in its report.

LLPs should therefore asses each of their partners to ascertain whether they were workers or self-employed, taking account of the factors highlighted by the Supreme Court in its decision, the regulator said. These include integration within the organisation, dependence or subordination, and whether the individual was exclusively engaged by the LLP or was able to provide services to anybody else.

As the Supreme Court's ruling applied retrospectively, partners who are found to be workers would have to be automatically enrolled with effect from the LLP's staging date unless the partner was an active member of a qualifying scheme on this date, according to the report.