Auto enrolment non-compliance fines increasing

Recent periods have seen unprecedented reforms to pension legislation and automatic enrolment is arguably the most significant.

By Taylor Patterson.

The changes will have some sort of impact on almost every single employer in the UK. As we move into the small and medium-sized employer sector of the auto enrolment landscape, we have seen a rise in penalty notices being issued as employers reach their individual staging dates in the next three years.

In the first quarter of this year, the Pensions Regulator watchdog has used its regulatory powers 446 times, with the total coming to 1,962 since the legislation came into effect in October 2012. To put the 446 into some context, the watchdog had used it powers only 23 times for the quarter to June 2014.

The reason for the increase in these numbers has not yet been fully disclosed by the watchdog; however, we would expect this to be a consequence of employers not fully understanding what is expected of them or wilful non-compliance. We would also expect the regulator to impose an increasing number of stringent actions, if it feels that cases of wilful non-compliance are trending upwards.

The regulator takes a proactive approach to compliance and is taking steps to ensure employers and their advisers fully understand who is required to do what and when in order to comply and avoid unnecessary penalties.

As a reminder, the Pensions Regulator can issue penalty notices to punish persistent and deliberate non-compliance.

A fixed penalty notice will be issued if the employer does not comply with statutory notices; this is fixed at £400. The regulator can also issue an additional escalating penalty notice for failure to comply, at a prescribed daily rate of £50 to £10,000 depending on the number of staff.

In addition to a number of fixed fines, the regulator has issued four escalating penalty notices carrying a daily fine against businesses that have failed to comply with their auto enrolment duties.

Whilst most employers will factor in the cost of contributions and professional advice, they will typically fail to appreciate the administration time burden on valuable human resource and ultimately, the cost of non-compliance. Our range of auto enrolment services is designed to ensure that employers meet their auto enrolment compliance obligations in a timely, simplified and low-cost manner, with a fixed fee service available for those looking to keep compliance costs to a minimum.