Pensions auto-enrolment enforcements increase by 300%

Action against companies failing to meet auto-enrolment requirements has increased by 306%, as smaller employers are required to sign their staff on to pension schemes.

Enforcement action rose to 8,812 occurrences in the year to March 2016, up from 2,169 the year before, according to the industry watchdog.

Since 2012, the Government has required employers to enrol eligible workers automatically into a pension scheme, and to make a minimum level of contributions, or to provide a minimum level of benefits in the case of defined benefit schemes.

Charles Counsell, executive director for auto-enrolment at the Pensions Regulator, said: “Our key challenge in the past year has been to engage hundreds of thousands of small and micro-employers and to help them prepare for automatic enrolment.

“We needed to target these employers in new and innovative ways. The hard work and commitment of the many organisations who support employers – from trade bodies to employer representative bodies – has made a huge difference.”

Auto-enrolment deadlines are coming into force on a rolling basis: large employers (250 employees or more) started in 2012, with medium-sized employers (50-249 employees) following in 2014.

Deadlines for small (5-49 employees) and micro-employers (1-4 employees) began in 2015 and continue until 2018.

The report attributes the increase in enforcement to smaller employers inevitably being less prepared.

Nevertheless, the first group of small and micro-employers subject to pensions auto-enrolment deadlines achieved a compliance rate of above 95%, said the watchdog.

“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,” Counsell said.

Of the employers who still face auto-enrolment deadlines, approximately 57% are micro-employers and 42% are small employers.

“Smaller employers need to be aware of the Pensions Regulator’s powers to issue escalating penalty notices,” said Qian Mou, employment law editor at XpertHR.

“Escalating penalties can be given to organisations that fail to comply with initial warning penalties; they accrue at a daily rate of £50 for micro-employers and £500 for small employers.

“As we saw in the case of Swindon Town Football Club, escalating penalties can add up quickly, although the organisation in this case was a mid-sized employer.”

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The Pensions Regulator’s formal powers include issuing compliance notices, conducting inspections and issuing penalty fines to employers.

It reported that as of March 2016, 66% of all UK employees were enrolled in a workplace pension, compared with 47% in 2012.