“The number of employers fined for failing to comply with new rules on workplace pensions is up and is expected to increase significantly as small and micro employers reach their auto-enrolment staging date over the coming year” says Ian Hill, pension specialist at Smith & Williamson, the accountancy, investment management and tax group.
“The regulator states that over 90 per cent of employers have staged correctly. However, these statistics represent only 12,000 small and micro employers entering auto-enrolment but with a further 500,000 small employers set to stage in 2016 this number is expected to rise substantially. ”
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 numbers of fines have increased over the past three months with close to two thirds of the 1594 total fines issued between 1 October 2015 and 31 December 2015. This escalation correlates to an increasing number of smaller firms reaching their staging dates for auto-enrolment.
“The Pensions Regulator has also begun issuing Escalating Penalty Notices. This penalty has a prescribed daily rate of £50 to £10,000 depending on the number of staff. Although only 24 companies were issued with this notice during the period, it still equates to almost 80% of the total penalties issued for auto-enrolment and with large numbers expected to stage in 2016 this should rise.”
“A significant number of the notices issued were to employers who had missed the deadline to submit their declaration of compliance with new workplace pension duties.”
”Over 2000 businesses received a compliance notice in the last quarter of 2015 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.
“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
