Smaller firms need to get into gear for auto-enrolment
Return to your car just minutes after your parking session has run out and you’re likely to find a fixed penalty notice on the windscreen. Glaring at you from inside its menacing black and yellow raincoat you can pay the fine in 14 days or see it double. Refuse to pay in 28 days and the fine gets notched up again. Before long the courts get involved and things becomes altogether more serious.
Fines aren’t so forthcoming for employers failing in their auto-enrolment obligations, but businesses can run into trouble as hundreds of firms are now finding out. Employers have five months after their staging date, which some may have deferred for three months, to register their scheme with the Pensions Regulator, and describe how they’ve met their auto-enrolment duties.
This is a mandatory requirement and it’s at this point the regulator will intervene if the scheme has not been registered or is not compliant. A whistleblower may bring problems to light earlier. In either event, involvement from the regulator may lead to a fine, which could become escalating, with the threat of criminal charges looming for those that completely refuse to comply.
In the last three months of 2014 a total of 166 firms were fined for failing to meet their auto-enrolment obligations – up from only three in the preceding quarter.(Opens new window) Not a huge number, perhaps, and only a very small percentage of the employers that have successfully complied. But as more and more small firms pass their staging dates there will be hundreds and possibly thousands that find themselves with fines to pay. This will happen for a number of reasons.
The first is that it’s the biggest firms with the deepest pockets that have passed their staging dates. As we go down the scale, it’s the smaller firms with fewer dedicated HR resources that now have to comply with the legislation. I believe many will struggle to understand exactly what’s required and to meet their obligations in time.
The second is that many of these smaller firms no longer have a relationship with a financial adviser in the post-RDR market, and so they’ve lost a potential source of information, guidance and advice on auto-enrolment.
The third is that from 1 June this year an employer’s staging date depends on the letters in its PAYE Reference Number. HMRC has this data – it’s linked to payrolls – but it can’t release it to pension providers as it doesn’t have the permission from individual firms to do so.
This means that as we get into the staging dates for these smaller firms it’s more difficult for providers to know exactly when they’re hitting their deadline and so give them the support they need.
Aegon has been campaigning for a number of years now on the need to get full disclosure on specific staging dates for all employers.(Opens new window) To make sure we’re doing as much as we can for our own workplace customers we’ve been contacting thousands of smaller employers to ask them for their staging date.
Unfortunately a lot of the firms we speak to still have no idea about auto-enrolment, the obligations it carries and the amount of time required to get ready. This is something we’re trying to change.
The Pensions Regulator has also started contacting small and micro businesses and recently announced it would be writing 1.5 million letters in the coming months.
There are a lot of changes that affect workplace pensions happening at the moment including: auto-enrolment, fee caps, new scheme governance rules, and increased personal pension freedoms. It’s really difficult for employers to keep abreast with these changes and smaller firms particularly need as much support as we can give them.
If employers understand what’s required of them in good time, they can make the most effective decisions for both the business and its staff. They’ll also avoid getting into hot water with the regulator and possibly having to pay a fine.
Angela Seymour Jackson
Managing Director, Workplace Solutions