The Pensions Regulator (tPR) shows concern over smaller employees leaving auto-enrolment too late.
It is now over 3 years since the auto-enrolment requirements were first introduced and the first employers staged. These large employers are approaching their first automatic re- enrolment date in 2016. Certainly, most signs so far have been positive. The National Audit Office’s October 2015 report examining the implementation of the auto-enrolment reforms highlighted among other points that the degree of employer compliance has been higher than expected, with 99% of employers submitting a declaration of compliance to the tPR.
Time has now come for smaller employers, those with less than 50 employees, to participate. This will include people who would not usually consider themselves business people or maybe even a business at all, so if you employ a Nanny pay attention! These employers are unlikely to be pension’s experts and tPR is worried that they may not have the knowledge nor the resource to implement the policy and hence may leave auto-enrolment too late or ignore it altogether despite the best efforts of the noble Workie.
There are around 45,000 small and micro employers reaching their staging date this year, and over a million next year and beyond. So, although we’re half way through the staging timetable, less than four percent of all employees affected by auto-enrolment have actually staged so far. The pensions industry needs to prepare for the remaining 96%.
Following research from tPR, it was found that less than a third of UK SMEs staging in 2016 accurately knew which date they had to comply by. According to them auto-enrolment obligations were highest among those that had received a letter directly from tPR compared with those that had not.
It’s worth noting, too, that previous figures from tPR suggested a steep rise in unpaid contribution notices issued to employers who failed to comply with their auto-enrolment duties in the last quarter.
The challenge of ensuring 1.8m employers meet their duties by April 2018 is significant; however, tPR is continuing to develop new tools on their website to simplify the process for employers and is using a diverse range of communications to reach out to employers. The message to employers is clear: start getting your plans in place or you risk a financial penalty.
Employers that fail to meet their auto-enrolment duties could ultimately face fixed penalty notices of £400. Those who continue to ignore their responsibilities could experience escalating fines.
Larger companies will receive larger fines than smaller companies, but as yet, tPR confirmed escalating penalties have only been used on a handful of occasions.
There are a number of actions employers need to take:
- Deciding when enrolment will be;
- Assessing who is eligible;
- Preparing employee communication;
- Submitting a declaration of compliance.
How long does it take to set up?
As the auto-enrolment requirements have been in place for over 3 years, this has allowed the process to be streamlined and easy to follow, which is particularly useful as we enter the stage of employers, who may have few or no advisers setting up auto-enrolment schemes. The set-up process for those with less than 50 employees takes around 3 weeks, with the remainder expected to take no more than a month. Planning should however start 6 months in advance.
The government has announced it intends to keep the auto-enrolment trigger; the amount an employee needs to earn to be eligible to qualify for auto-enrolment at £10,000. This isn’t without its critics, as some may say this is a missed opportunity for those working part-time, obstructing lower paid workers from the chance to save for a pension.
Future for Employees / Employers
Contributions may well need to rise in future in order for people to have the sort of retirement they want.
For those who have not yet reached their staging date, they have had the luxury of tPR honing its processes and procedures over the last few years. There is a raft of information available and help at hand from many sources, meaning set-up should not be an administrative burden to fear.
Employers, if you haven’t already done so, get a move on reviewing your arrangements.