“The number of employers fined for failing to comply with new rules on workplace pensions is continuing to rise and is expected to increase significantly as more and more employers reach their automatic enrolment staging date,” says Ian Hill, pension specialist at Smith & Williamson.
The Pensions Regulator has reported that 806 employers have been issued with a Fixed Penalty Notice (FPN) for failing to comply with a statutory notice or a specific duty over the past three months.* With 82% of all FPNs having been issued within the last 6 months there are signs that as the smaller employers are reaching their staging date they’re increasingly finding problems.**
“The regulator states that over 95% of employers have staged correctly. However, they are basing this assertion on information available up to 31 March but there are still hundreds of thousands of employers yet to reach their staging date. The regulator would also have no idea whether a scheme was compliant for a number of months after the staging date.”
From 1 June 2015 an employer’s staging date depended on the letters in its PAYE Reference Number and, being small (30 employees or less), many of these firms will not have ready access to information, guidance or advice on pension changes.
“The Pensions Regulator has also begun issuing Escalating Penalty Notices (EPN). This penalty has a prescribed daily rate of £50 to £10,000 depending on the number of staff. The regulator has reported, for the first time, a large number receiving these EPNs; 24 over the past three months alone. Considering the figures involved a failure for businesses to appropriately address this issue could prove catastrophic.”
”Over 2500 businesses received a compliance notice in the first quarter of 2016 so are on a watch list. This should be taken as a warning sign to the regulator that a huge volume of smaller firms are still not prepared for auto-enrolment. In future months, we should expect to see more employers who, despite the message to prepare early for pension changes, leave it too late or do not comply at all.” says Ian Hill.
Historically, one could question the ability of the Regulator to visit hundreds of thousands of companies to see if they have complied with their legal obligations. However, in future, reports will be computerised so the regulator will be able to carry out checks remotely.
The number of contested fines rose during the period as there were three times as many cases litigated during the period when compared with the previous 2 years combined.
“It is essential that employers understand their legal obligations and the processes needed to ensure their Pension Scheme(s) remains compliant. This is an issue which becomes increasingly pertinent as automatic enrolment draws in large numbers of small businesses and providers begin to suffer from capacity problems,“ says Ian Hill.