Regulatory policing of auto-enrolment has become stiffer. But the external services available mean there is no excuse for non-compliance.
If you don’t want the fine, then get in line. This is the message now being issued loudly and clearly by The Pensions Regulator (TPR) when it comes to the auto-enrolment legislation it is responsible for policing.
In the year between April 2018 and March 2019 TPR issued 49,032 fines for non-compliance with auto-enrolment, an increase of over 37% from the previous year.¹ Furthermore, anyone who imagines that the financial penalties being dished out are similar to parking fines might want to think again.
The regulator’s latest quarterly compliance and enforcement bulletin, released this August, reveals how it imposed a £350,000 fine on an unnamed London based services company with 5,000 employees for failing to re-enrol staff in its workplace pension correctly.¹
Obviously, this size of fine is the exception rather than the norm but following an initial warning letter, statutory notice and fixed fine of £400, escalating penalties can occur at a daily rate of between £50 and £10,000 (depending on the number of staff employed.)
It is also important to realise that that wilful failure to comply with auto-enrolment is actually a criminal offence and can incur an unlimited fine in a magistrates’ court or up to two years’ imprisonment in the Crown Court.
The services company concerned had failed to provide documentation to show that it had completed its re-enrolment duties, and a follow-up inspection and further onsite meetings highlighted other failures, including incorrect opt-out processes and contribution calculations as well as communication failures to staff.¹
As a result, in addition to paying the massive fine, the employer has implemented new processes and procedures to prevent future compliance failures, re-enrolled over 40 staff and paid over £100,000 of backdated pension contributions.¹
In our experience, the main non-compliance issues continue to concern employers who have never got around to implementing auto-enrolment at all, but this case spells out how even those who acted correctly at outset should be highly aware of their ongoing duties.
They must still monitor staff ages and earnings to see if they need to be put in a scheme, pay contributions on time, manage requests to join or leave the scheme and keep accurate records. They must also carry out re-enrolment, put staff who opted out back into a scheme, and complete a re-declaration to state this has been done.
It is important to realise that TPR is becoming increasingly smart when it comes to sniffing out any area of auto-enrolment non-compliance. It is employing targeted use of data, and its enforcement powers include the ability to carry out spot checks.
The August compliance and enforcement bulletin reveals that 74% of spot checks since the beginning of the year revealed breaches of pensions legislation, with 76% of these resulting in enforcement action.¹
Nevertheless, we find that TPR still tends to be eminently reasonable when employers have made genuine mistakes. More often than not, it will seek to work with them to put things right before issuing fines.
It is crucial that all employers make it a high priority to understand exactly what is required of them and that they audit their processes appropriately but, if any problems do arise, the message is to get in touch with TPR as soon as possible and allow it to help them sort things out.
Furthermore, engaging an expert firm of advisers like Chase de Vere to help with auto-enrolment issues can make TPR realise that that the job will be done properly and that it doesn’t have to be so hands-on in chasing you.
It can also greatly speed things up. We can often sort out problems in only a few days, which can realise substantial savings for a firm accumulating daily escalating penalties.
Additionally, on the basis that prevention is better than cure, there is much to be said for taking advantage of our Workplace Pension Healthcheck or Pension Audit. Both can ensure you are compliant, so there is no excuse for falling foul of the auto-enrolment legislation.
Content correct at time of writing and is intended for general information only and should not be construed as advice.