In their latest research and analysis report into automatic enrolment, The Pensions Regulator (TPR) has given us an insight into how employers are responding to automatic enrolment and how TPR are using their powers to ensure compliance.
Registration becomes ‘declaration of compliance’
TPR state that between July 2012 (the earliest that the employer duties could apply) and the end of March 2014, 10,817 employers registered with them. The only thing of note here is that ‘registration’ is now called ‘declaration of compliance’ as TPR found evidence that employers didn’t understand how important registration was and what it meant.
The use of postponement
Of those ten thousand or so employers who completed a declaration of compliance, almost five thousand used postponement – and for good reason. By using postponement, employers can save significant chunks of administration and payroll time and money. Postponement can be used in various ways and can be used for individual workers, groups of workers, or all the workers in an employer’s business. In the main, we have found that many employers will use postponement to fit key payroll dates and processes within the strict deadlines associated with automatic enrolment.
Some employers might think that most or all of their workers will opt out. But all the indications are that opt out rates are much lower than expected ranging between 5% and 15%. As a result, the DWP has changed its assumption for the opt-out rate amongst all employers – including small and micro employers – from 30% to 15%. The main reasons identified by TPR for opt outs are age (i.e. older people) and people who opted out of contractual enrolment and then opted out of automatic enrolment as well.
Compliance and enforcement
So far, it looks like the vast majority of employers are getting it right. TPR say that 99% of employers have achieved compliance without intervention. However there have been several cases they have investigated and used their powers.
TPR state that they opened a total of 1,251 ‘intelligence referrals’ from 1 April 2013 to 31 March 2014. The intelligence referrals themselves came from TPR’s own customer support function (51%), other teams within the regulator (30%), whistleblowers (16%) and external bodies (3%). It’s worth noting the reasons for referrals by whistleblowers were missing or non-payment of contributions (54%), other forms of non-complaince (43%) and scheme governance and allegations of inducement (3%).
Of these 1,251 referrals, 785 cases were opened and all but one was closed to the end of March 2014. Compliance was achieved for the vast majority without any formal action by TPR but on 18 occasions (less than 1% of cases) TPR needed to take things further. There were 14 compliance notices, one unpaid contributions notice, two statutory inspection notices and one Statutory Demand issued. An example given by TPR in its use of an inspection notice is for a case where a breach was identified and TPR entered an employer’s premises to investigate the payroll software and speak to the staff responsible for the employer’s automatic enrolment project.
With so many employers staging in 2015 and 2016, planning early is even more important. TPR already anticipate that they will have to use their formal powers more – in particular where they identify wilful non-compliance. Given the level of non-compliance so far, it seems inevitable that probably sooner rather than later, the first fine will be issued by the TPR. As a result, over the next 12 months, part of TPR’s focus will be to educate employers and raise awareness of automatic enrolment as well as reaching out to the professionals that will help employers get compliant.
Main source: TPR – Automatic enrolment commentary and analysis: April 2013 – March 2014.
1 – TPR, Employer staging forecast, January 2014 (http://www.thepensionsregulator.gov.uk/docs/automatic-enrolment-employer-staging-forecast.pdf)
Business Development Manager