AE compliance

01 September 2019

This article was featured in the September 2019 issue of the magazine. 

The Chartered Institute has partnered with Sanctum Software ( and Barnett Waddingham LLP ( to provide members’ firms with access to an automatic enrolment (AE) compliance checking service. The service involves an initial check by Barnett Waddingham followed if needed by a detailed AE compliance audit by Sanctum Software. Where issues are found, the Sanctum audit can identify errors and calculate corrections. Barnett Waddingham can also provide advice and support where needed, to ensure that the reasons why compliance failures have occurred are understood and resolved.

The rules concerning AE are complex, causing many employers to struggle with their duties. In 2017/18, The Pensions Regulator issued more than 60,000 compliance notices, and more than 28,000 fixed penalty notices to employers that have struggled. 

The AE duties typically relate to: human resources (recruitment and induction); payroll (assessment, contribution collection and payment uploads); record keeping (data integrity); and compliance (declaration of compliance, certification and re-enrolment every three years). These are the main areas where typical problems can arise; for example, collection and payment of contributions can often catch employers out, usually around the required percentages of contributions, net or gross amounts to be deducted, data errors and rounding differences. 

The two case studies give an idea of the type of problems employers can face when dealing with AE. Compliance is not always straightforward and resolving any issues can be difficult and costly for the employer to put right.

Case studies 

1 – Net pay v gross pay

Employer A had initially set out to pay pension contributions after the deduction of tax (known as ‘relief at source’). 

It is the pension provider’s responsibility to reclaim tax relief at the basic rate and apply this for members. 

Due to a change of payroll personnel at employer A, the process for paying pension contributions changed, with ‘gross’ contributions subsequently being paid (known as the ‘net pay’ basis). The pension provider was not informed and was still reclaiming basic rate tax relief on contributions received, meaning that extra tax relief was wrongly being applied to members’ pension savings.

After an investigation into the process for paying pension contributions, employer A decided to repay the additional tax relief to HM Revenue & Customs to avoid deducting this from members’ pension savings. 

This was a costly error which stemmed from a simple mistake.


...resolving any issues can be difficult and costly for the employer to put right


2 – Contribution percentages amounts

Under AE, employers have a duty to pay minimum levels of contributions which have increased, with the most recent increase taking effect from April 2019. 

Employer B had been paying incorrect employer and employee contribution percentages, which were below the required AE minima. This error meant that insufficient contribution amounts had been paid to members’ pension savings, resulting in a contribution shortfall of about £500,000. 

The AE process was re-run from staging date to calculate the correct pension contributions, and employer B had to pay extra contributions to put members in the position they should have been in. A further review of the payroll software showed that employees who reached age 22 were not being enrolled, and processes were put in place to correct this going forward.