Auto Enrolment: There may be trouble ahead
As we hurtle through 2016 there is good news and bad news coming out of the Auto Enrolment world.
Are you ready?
The good news:
To the end of March 6,100,000 people have been automatically enrolled and 110,000 employers have been through the whole process.
TPR, The Pension Regulator, executive director for auto enrolment Charles Counsell said: "The compliance rates achieved have been consistently at the top of our expectations and the savings landscape has been transformed. But we know the job is not yet done and there are still significant challenges ahead."
Needless to say, the increase in the number of people saving towards their own retirement is great news.
There has also been a lot of concern within the industry that we are heading to a bottle necks the volumes of employers required to stage each month goes through the roof. This time last year, TPR estimated that 1,800,000 firms would have to go through this process, the estimate has been revised down by 480,000 and is now expected to be between 1,320,000 and 1,460,000.
The reduced demand will hopefully mean the provides have a better chance of coping with the forthcoming demand.
Having said this, if 110,000 companies have staged since October 2012 it still means there are still up to 1,350,000 to go!
Do you know your staging date? Are you clear on your responsibilities? To start, check out The Pension Regulator's website: www.thepensionsregulator.gov.uk
The bad news:
Figures from NOW:Pensions show that 21% of the companies that signed up did so after their staging date.
Given where we are, this is largely understandable. Small business owners have a great deal on their plates and it is easy for auto enrolment to be put on the back burner. Having said this, all employers must remember that TPR has strong powers to ensure compliance and fines are being issued.
A recent high profile case of non compliance is Swindon Town Football Club who have received a £22,900 fine after failing to register their eligible workers.
Charles Counsell says "Failing to comply on time will not save you money. Not only do you risk a fine, you will also have to make back dated contributions."
Penalties for non compliance
Leaving things to the last minute and missing deadlines can result in escalating penalties. The TPR issued 806 fixed penalty notices and 96 escalating penalty notices between January and March 2016.
The TPR will issue a fixed penalty notice of £400 if you fail to comply with a statutory notice.
Employers who continue to fail the necessary steps to comply will be issued an escalating penalty notice based on the number of workers they have:
£50 a day - between 1-4 employees
£500 a day - between 5-49 employees
£2,500 a day - between 50-249 employees.
The gradual reduction in the size of the companies staging is also leading to Financial advisers becoming less involved. In autumn 2015, TPR found 66% of IFA's viewed auto enrolment as a business opportunity. By spring 2016, this had fallen 13% to 53%.
Why is this a problem?
The survey covered IFAs, accountants, payroll administrators and bookkeepers. IFAs were by far the most knowledgable about auto enrolment.
Conclusion
In the next 12 months a colossal number of companies are effected by auto enrolment.
Employers have a number of responsibilities in complying with their workplace pension duties. Here are some of the legal requirements:
provide information to all workers about auto-enrolment
enrol workers between 22 and state pension age earning £10,000 a year or over
register non-eligible workers who decide to opt in
remove those who have decided to opt out within the opt out period
re-enrol workers who opt out of the scheme every 3 years
re-declare compliance after re-enrolment and keep all relevant records.
Employers should not do the following:
attempt to persuade workers to opt out of auto-enrolment
act in a way, or fail to act in a way, that stops employee worker being part of the pension scheme
indicate during recruitment that a decision to opt in or out will affect the decision.
Please plan as early as you can, and try not to get fined!