Automatic enrolment: Round up from the Pensions Regulator

05 March 2015

The Pensions Regulator has provided an update of recent developments.

As expected, it’s been a busy start to 2015. The Pensions Regulator has begun sealing the envelopes and posting the first of its ‘all employer’ mail out letters. We’ve refreshed our website, introducing information targeted directly at the many hundreds of thousands of small and micro employers due to automatically enrol staff in the next two years.

While we have a new audience every month – as automatic enrolment rolls out to new employers – our core messages remain the same. Know your staging date, find out what you need to do and by when, make sure you leave sufficient time to prepare, and test your systems in advance of your staging date being recurring themes.

AE: The wind of change

The introduction of automatic enrolment has also been a catalyst for bringing business advisers such as bookkeepers, accountants, IFAs and payroll professionals into the planning process for discussions about how major organisational changes will be implemented. Those employers that have done so, well ahead of their staging date, have avoided some of the challenges and complexities faced by others due to data compatibility problems.

The focus of attention is moving away from the in-house payroll teams of the large employers who have automatically enrolled over the past two years. Bookkeepers, accountants and payroll bureaux are now on the front line of assisting their clients to effectively enrol their eligible workers. These days, it’s not the boss, but the client who is tapping on your shoulder asking for a solution for automatic enrolment.

Our compliance work

The end of last year coincided with the deadlines for the thousands of medium employers who staged in the early summer of 2014 to complete their declarations of compliance.

At the regulator, as predicted, the number of times the regulator used powers such as fines, and inspections rose significantly. For example, at the end of September 2014, we had issued a total of 177 compliance notices since July 2012 but over 1,000 more were sent out in the final quarter of the year. There are two underlying reasons explaining the increase in use of powers during this quarter. First the fact that more employers have staged, and second, as anticipated, the behaviour of smaller employers is different. There are more who, despite the message to prepare early, leave it too late.

Enforcement action starts with statutory notices and is followed by penalty notices. Further non compliance may result in court action. In the majority of cases, employers who have received a statutory notice from the regulator are prompted to follow the instructions given to them and take action to meet their duties to their workers. 

Proactive compliance work

It’s worth sharing with you one piece of information contained in our latest compliance and enforcement bulletin, which details our use of powers and shares lessons learnt to help other employers and their advisers.

Employers must tell us how they have complied with their duties by providing certain information through the online declaration of compliance. One of the main reasons employers were issued a compliance notice was because they had failed to complete a declaration within five months of their staging date.

Using the systems and data available to us we have been proactively checking the accuracy of information submitted by employers when they declare compliance. As a result of this, we have been selecting employers for further engagement, which has included visiting premises to check records and interviewing key staff.

More than 1.3 million employers need to comply with their new workplace pensions over the next three years and declare compliance with us. That is why ensuring the accuracy of declarations made by employers will continue to be a focus for the regulator.

The impact of a letter from the regulator

One final reminder, be ready for questions from clients who receive a letter from The Pensions Regulator. The roll out of automatic enrolment has so far been a success and the letter we are sending to all small and micros over the coming months, which started from the end of January, will make clear when their duties begin, enabling them to plan ahead.

The message for business advisers is clear: be prepared for clients to approach you about automatic enrolment and let your clients know to look out for a letter from The Pensions Regulator in the coming months.