In the spring 2016 issue of smalltalk we invited Vicky Quigley from Demna Consulting to take you through the Auto Enrolment process step-by-step. A year on, we have asked Vicky to update you, as employers, on the implications of failing to comply with the Auto Enrolment regulations.
At the time of writing over 500,000 Employers have now completed Auto Enrolment, according to the recent figures from The Pensions Regulator. There are around 900,000 Employers still to go through the Auto Enrolment process, however, with most of these being small or micro businesses.
For some of you reading this, you will already have dealt with this and if so, I would still urge you to read on as your duties do not stop at your staging date. However, for those of you who have not yet reached your staging date, or have ignored your staging date – it is vital that you understand the implications of not complying with the Auto Enrolment regulations.
Every quarter, the Pensions Regulator issues a report which details the number of compliance actions it has taken. The most recent report covered the 3 month period to 31st December 2016 and showed a horrifying increase in the number of Employers not complying with the law.
Some of these Employers will have genuine issues, but a growing number are simply ignoring Auto Enrolment, assuming it has nothing to do with them despite the repeated reminders from the Pensions Regulator and from the colourful Workie on TV!
In the last 3 months of 2016, the Pensions Regulator issued a total of 2,919 Fixed Penalty Notices of £400 to Employers as the first consequence of non-compliance. In addition to this, they also issued 870 Escalating Penalty Notices over the same 3 month period with fines ranging from £50 to £10,000 a day (depending on size). More than a third of all fines issued in the last 5 years have been issued in the last 3 months of 2016 – a worrying sign that some Employers are just not taking this seriously.
To a small provision, even the starting £400 fine for non-compliance could be catastrophic – so it is vital that you don’t bury your head in the sand and that you ensure you comply with the Auto Enrolment regulations.
If you are reading this and know that you have passed your staging date or that you have been ignoring this – you must take action immediately. The Pensions Regulator is a lot more understanding with Employers who are taking action to correct things, who are clearly trying to make things right!
In order to help you ensure that you don’t fall foul of these fines either initially or going forward, I would suggest reviewing your own arrangements and preparations against this simple checklist:-
At your Staging Date you should:-
- Have a Qualifying Pension Scheme in place for your Employees;
- Have sent out communications to all Employees which include the required statutory wording;
- Have completed the certification process if you are not using Qualifying Earnings;
- Have assessed your Employees and automatically enrolled those who are eligible into your Qualifying Pension Scheme;
- Given all other Employees the chance to join the Pension Scheme.
Within 5 months of your Staging Date you should:-
- Have completed and submitted your Declaration of Compliance to The Pensions Regulator.
After your Staging Date:-
- Every pay period (whether this is weekly, fortnightly or monthly) you should be assessing your employees to see if anyone has become eligible – if this is the case then they should be auto enrolled into your Qualifying Pension Scheme;
- New Employees should be provided with information on your Qualifying Pension Scheme within 6 weeks of being employed. If you are postponing the auto enrolment of new employees then postponement letters should be sent to them within 6 weeks advising them when they will be assessed and that they can join in the meantime if they wish;
- If you are using postponement for new employees, then you must ensure that your postponement letters are compliant – for example, the letter must state the specific date at which that employee will be assessed for auto enrolment, you can’t just state that this will be in 3 months’ time;
- Contributions must continue to be paid to your Qualifying Pension Scheme for those employees who have remained in the Scheme. These cannot be stopped unless the Employee chooses to stop them or has no earnings in a pay period;
- Re-enrolment must happen every 3 years – this is where all employees who have opted out must be re-enrolled back into your Qualifying Pension Scheme;
- Your Re-Declaration of Compliance must be completed and submitted every 3 years to The Pensions Regulator.
Please don’t be complacent about this – not only do the Pensions Regulator and HMRC share information, the Pension Scheme Providers also have a duty to provide any information requested by them. In addition to this, The Pensions Regulator announced on 2 March 2017 that it has started to carry out spot checks on Employers who have already staged to ensure they continue to comply
The lists above are not meant to be an exhaustive guide to your duties – but hopefully these provide enough detail to consider whether the arrangements you have in place are suitable. If not, then you could very well end up with a fine – which could mean the end to a number of small businesses.
How we can help
We offer a range of Fixed Fee Services to help all Employers, no matter the size, get the good quality advice and assistance needed to ensure they fully comply with the new regulations.
For more information or a chat about how we can help you and your organisation please do get in touch by calling 0121 240 5378 or by emailing email@example.com
The guidance and / or advice contained within this article are subject to the UK regulatory regime, and are therefore targeted at consumers based in the UK. Demna Consulting Limited is an appointed representative of Best Practice IFA Group Limited which is authorised and regulated by the Financial Conduct Authority. Registered in England, number 8409805. Registered office: 71 Francis Road, Edgbaston, Birmingham, B16 8SP. VAT Registered: 160 7201 44. Demna Consulting Limited is entered on the FCA register, www.fca.gov.uk/register under reference 606402.
Auto enrolment; are you ready? (smalltalk spring 2016)
You and your pension – just when you thought it was all over (smalltalk winter 2017)