Over 100,000 employers have enrolled more than 6.4 million workers into automatic enrolment workplace pensions so far. Ultimately, around 9 million workers will be newly saving or saving more into a pension. The good news is that employee opt-out rates have been lower than expected. The Department for Work and Pensions had initially expected a 28 per cent opt-out rate. However, the rate currently stands at around 10 per cent.
Smaller businesses joining in
The roll-out of auto-enrolment continues until 2018 when all schemes are expected to be in place. More than 1.8 million small and micro-employers are now reaching their staging dates.
According to figures from The Pension Regulator (TPR), more than 95% of the 63,700 companies that have staged since July 2012 have complied with the law. However, that represents only part of the story. 2,234 businesses have missed the deadline and have been issued with fixed penalty notices of £400. If this rate of fines were to continue, it’s been estimated that around 63,000 businesses could be liable for non-compliance fines, equating to more than £25m.
Charles Counsell, Executive Director for automatic enrolment at TPR, commented: “Most employers comply on time, and we continue to see compliance rates in the high nineties. Others need a nudge and are prompted to meet their duties when one of our notices comes through their letterbox.”
Research amongst pension providers has shown that whilst many firms complied within a month of their staging date or even earlier, it’s estimated that one in five missed their staging date altogether.
TPR’s “nudge” to those who don’t get to their start date on time comes in the form of a series of penalties for non-compliance. The number of Escalating Penalty Notices (EPN) TPR issues is on the rise. An EPN is just one of the statutory powers at its disposal to help ensure employers don’t overlook their automatic enrolment responsibilities to their workforce.
The penalties for small business owners who don’t comply can mount up quickly. Once their staging date has been missed, they will receive a 28 day warning notice. If the warning notice goes unheeded, then a fixed penalty notice of £400 is issued, and it doesn’t end there. On top of that, employers with between one and five workers can be fined £50 per day. Those employing between 5 and 49 can be fined £500 a day. However, TPR is quick to point out that any employer experiencing difficulties would be advised to engage with them as early as possible to prevent the penalties from escalating further.
Leaders and laggards
There’s a lot for a small business to consider when setting up an auto-enrolment pension scheme, everything from postponement rules, to deductions, to staging dates and payroll requirements. For small organisations it can be quite an administrative burden on top of everything else they have to contend with on a daily basis. So it’s hardly surprising that employers divide into planners and procrastinators. It’s to be hoped that they all manage to get there in the end.
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