Automatic enrolment

25 October 2018

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

The Pensions Regulator provides commentary and analysis of compliance

More than 1,200,000 employers have now successfully met their automatic enrolment duties and put nearly 10,000,000 staff into a workplace pension. 

Workplace saving has become the social norm with 84% of staff now saving, and automatic enrolment has reached steady state with around 100,000 new businesses a year putting staff straight into a pension. 

However, automatic enrolment has ongoing tasks which must be completed to ensure employers continue to comply with the law, and staff continue to receive the pensions to which they are entitled.

Ongoing duties include monitoring the age and earnings of staff, keeping records, managing requests to leave or join a pension scheme and maintaining pensions contributions. More information about ongoing duties can be found here: https://bit.ly/2nzQucb.

Every three years, employers must also complete re-enrolment which means enrolling all eligible staff who are not currently members of a workplace pension into a scheme. They must then complete a re-declaration of compliance. 

Last April, the minimum pensions contributions increased from 3% total contribution to 5% and next April it will increase again to 8%. This is a straight-forward task for employers, but they should ensure the correct amount is being paid into the pension scheme. We have been monitoring compliance with the increase in April through pay as you earn data provided by HM Revenue & Customs and indications are that it is very high. 

 

...employers spend less than two hours a month on their ongoing tasks...

 

As published in our recent sixth edition of Automatic enrolment Commentary and analysis report (https://bit.ly/2pt35fk) compliance with the law is high. Our research shows the vast majority of employers are aware of and understand their ongoing duties, find them easier than expected and are confident they can complete them. Most employers spend less than two hours a month on their ongoing tasks and one third use a business adviser. 

However, there are a small minority who fail to meet their ongoing duties and we will take action, including issuing financial penalties. 

There are a number of ways we can detect non-compliance. This includes monitoring contributions to ensure employers are continuing to make the correct payments, alerts from pension schemes, reports from whistleblowers and compliance validation checks. 

Between April last year and April this year we carried out nearly 2,000 compliance validation exercises, or ‘spot checks’ nationwide. Employers were identified through data and intelligence analysis and scheduled for either desk-based investigation or an inspection in person. Employers targeted included those we believed may be non-compliant and those where our data suggested full compliance. 

Where we found an employer was non-compliant, our case teams took a positive approach and worked to help them. In many cases, employers welcomed the opportunity to show how they had complied and ask questions to ensure they were carrying out their duties correctly. 

We know that most employers want to do the right thing for their staff and we are here to help, but we will take action where an employer is non-compliant to ensure staff receive the pensions they are due and the culture of workplace saving remains strong. 

 

In October 2018, The Pensions Regulator began overseeing the authorisation and supervision of master trusts to ensure members are in financially stable, well-run schemes and can use enforcement powers if it finds this is not the case.

 

Statistics from the report covering the period April 2017 to March 2018

•  662,978 employers completed their declaration of compliance

•  total staff automatically enrolled reached 9.5 million, which means 84% of UK staff were in a workplace pension

•  60,952 compliance notices issued, with one third of these being made in the period January to March 2018

•  4,499 unpaid contributions notices issued

•  28,864 fixed penalty notices issued, of which 11,000 were in the period January to March 2018

•  7,027 escalating penalty notices issued, with 2,500 made in the period January to March 2018    

•  249 information notices issued

•  906 inspections undertaken.