Updated 2 weeks ago ​by Olga Sala

The Pensions Regulator (TPR) recently announced that it's fined 40,000+ companies over auto-enrolment failures.

The scale of action shows that auto-enrolment compliance has been more complex than many companies anticipated, with even well-intentioned organisations feeling the brunt of TPR’s scrutiny.

As a result, many companies are unknowingly and unnecessarily exposed to risk – and management teams need to take a leadership role in mitigating it.

Here’s what you need to know – and the steps you should take – to ensure the company is meeting its auto-enrolment obligations.

The Pensions Regulator has gotten “tough on non-compliance” – and finds breaches in 74% of spot checks

The numbers are big:

  • 40,301 firms issued with compliance penalties in 2018
  • 41,057 firms sent compliance notices or unpaid contribution notices but fixed the issues before incurring a penalty charge

That’s 81,358 companies the regulator found to be in breach of their legal duties last year. And the scrutiny is continuing. Here are the figures for 1 January to 30 September 2019:

  • 20,298 firms issued with compliance penalties
  • 33,529 firms sent compliance notices or unpaid contribution notices but fixed the issues before incurring a penalty charge

That puts the 2019 running total at 53,827 companies.

TPR has said it’s being “tough on non-compliance,” that it’s continuing to carry out “country-wide inspections,” and that it's cracking down on inaccurate record-keeping. This stance is reflected in its audit findings – it found breaches in 74% of spot checks conducted in 2019. And 76% of those breaches resulted in enforcement action.

Fines escalate quickly

If TPR identifies a breach, it gives you a deadline for rectifying them. If you miss the deadline, you’re issued with penalties.

At the lower end of the scale, there’s a £400 fixed penalty. But you can also have an escalating penalty of between £50 and £10,000 per day depending on the number of affected workers.

Here are some examples:

Most errors are unintentional - and companies don't know they're in breach

Husky CEO Brendan Shanks has been spearheading discussion of this issue within the business community. Auto-enrolment compliance is more complicated than most companies anticipated – many found to be in breach thought they were complying in good faith.

Most issues come from unintentional process errors, but companies are still liable for potentially major fines. Common examples include:

  • Incorrect pension set-up, which leads to tax underpayment and pension overpayment
  • The way tax relief is applied to pension contributions
  • Pension contribution calculation methodology not aligning across payroll and the scheme
  • Not starting employee contributions on the correct date
  • Missing out on key employee changes, like hitting age thresholds
  • Not handling and documenting opt-outs correctly
  • Issues with mandatory re-enrolment management

Most breaches can be sorted

If you’ve received a compliance notice, the first step is to conduct an auto-enrolment compliance audit, so there’s clarity about what all issues are (the right technology makes this straightforward).

We do this regularly for clients, and have assisted employers with the appeal process after we’re satisfied their pension scheme is compliant. Numerous non-compliant companies that used our service have had their fine dramatically reduced – and in some circumstances dropped completely.

TPR ultimately has the same goal as you - to support employees

The regulator’s aim is to maximise compliance, so it’s more about helping businesses address issues than issuing fines for the sake of it. Their ultimate goal is to ensure people are saving for retirement in the appropriate way, which aligns directly with employers’ benefit and wellbeing strategies.

And looking at it broadly, auto-enrolment has been successful. 84% of workers aged 22-29 in the private sector saved into a workplace pension in 2018 – up from 24% in 2012 (when auto-enrolment came into force). And although there’s work to be done supporting businesses and employees and making pension savings more accessible, it’s clear we’re on the right road.

Workplace pension complacency is no longer an option

The questions business leaders now need to ask are:

  1. Why are we putting off reviewing auto-enrolment compliance, given the financial and reputational risks to the company and its directors?
  2. Are there ways we can support admin and payroll staff to ensure compliance ongoing?
  3. How can we make the most of workplace pensions as a way to engage employees and enhance their wellbeing?

(And if you need help formulating answers, get in touch.)


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