AE compliance

25 September 2018

This article was featured in the October 2018 issue of the magazine.

The Pensions Regulator reveals how it identifies and successfully pursues employers that do not comply with their duties 

Nearly 10,000,000 staff have now been enrolled into a workplace pension by more than 1,200,000 employers and more than 1,000 new businesses are meeting their duties each month. Automatic enrolment (AE) has been a huge success, but there are a tiny minority who fail their staff by not meeting their responsibilities. 

We recently launched a series of short-notice inspections on employers across the UK suspected of providing false or misleading information about how they are meeting their AE duties. The compliance drive follows an initial series of spot checks carried out over the past twelve months targeting employers across different regions. 

We will take action if an employer is deliberately non-compliant, but we know most want to do the right thing for their staff and we are here to help by providing the information and tools they need. We have easy to use online information and tools which have been designed for people who do not have pensions experience and employers should make our website their first port of call: https://bit.ly/2xNLxjF. 

 Some employers use a business adviser to help them with some or all of their responsibilities. It’s important that both the employer and their adviser are clear about who is doing what so that important tasks are not missed. While business advisers offer a range of services, complying with the law is the employer’s responsibility. 

Once employers have enrolled staff, they will need to maintain the correct pension contributions. In April, the minimum total pension contribution increased from 2% to 5% and next April it will increase again to 8%. Increasing contributions should be fairly straightforward for employers as most payroll software will automatically deduct the correct contribution at the correct time, and most pension scheme providers will alert members to the increase. However, employers should check the correct contributions are being made to avoid the risk of non-compliance. 

...check the correct contributions are being made to avoid the risk of non-compliance 

The number of times we used our compliance powers between January and March this year made up twenty per cent of all the powers we’ve used since the start of AE. We have now issued more than 43,000 fixed penalties and more than 9,000 escalating penalties. We will take action if an employer falls short and fails to comply. 

For employers that continue to fail, there are a number of ways we are alerted. These include analysing information from declarations of compliance and comparing it with other data, pension schemes reporting missing or inadequate contributions, conducting employer spot checks across the country and reports from whistleblowers. 

Whistleblowers are almost always the victims, so have the most to gain from helping us to make their employers compliant. Those at the heart of a business may just have suspicions that something isn’t quite right, or they may know about a specific problem.

Whistleblowers alert us to instances where managers have told their staff that they won’t get a pay rise if they join a pension scheme, businesses that mislead their employees by falsely claiming they have been automatically enrolled and companies that keep quiet about their duties in the hope that their workers won’t notice that they haven’t been given the pensions they’re entitled to. 

It was a whistleblower who alerted us to the situation at Birmingham-based Crest Healthcare, where staff were told that pension contributions were being paid by the employer when, in fact, a scheme hadn’t even been set up. Both the company and its managing director were prosecuted and after pleading guilty have now been ordered to pay a total of more than £20,000 in fines and costs. Both have criminal records, while their staff now have the pensions they had been denied. 

In another recent case, thanks to the vigilance of the pension provider, we took action when an employer illegally opted temporary staff out of the NEST pension scheme into which they had been enrolled. Staff at national recruitment agency Workchain Ltd impersonated the temporary workers to opt them out of their pension using NEST’s on-line portal.     

Company owners and directors had encouraged five senior staff at the company to opt the temporary workers out of the scheme to avoid making pension payments on their behalf. 

Following a joint agency investigation, we prosecuted Workchain, the two directors and five senior staff for an offence of unauthorised access to computer data under the Computer Misuse Act 1990. The defendants pleaded guilty to the offence. 

These cases demonstrate that The Pensions Regulator will take action against employers that fail to enrol their staff into a pension scheme and deliberately attempt to avoid their responsibilities. Automatic enrolment is the law and, where appropriate, we will take employers to court to ensure staff receive the pensions they are due.