TPR: Half million less AE employers than predicted

The auto-enrolment rollercoasterAlmost half a million less employers than predicted will have to go through auto-enrolment because they are ‘single person directors’, the Pensions Regulator has confirmed.

In its 2015 annual auto-enrolment commentary and analysis TPR revised up the number of small and micro employers that would need to meet their pensions duties over the following three years to 1.8m, compared to an earlier estimate of 1.3m.

But this year’s commentary and analysis has revised the figures back down to between 1.45m and 1.32m.

TPR says HMRC Real Time Information (RTI) data and feedback from employers helped it identify that a much larger number of businesses are companies with one director and no other members of staff – referred to as ‘single person directors’.

TPR says: “Where a company has a single director and no other staff, it is not an employer for the purposes of AE and therefore is not subject to duties. These organisations were included in the number of employers in our previous staging forecast.”

The report says more than 2,000 employers were issued with fixed penalty notices and 122 received escalating penalty notices From April 2015 to March 2016.

In its fourth annual report, TPR said compliance rates amongst the first group of small and micro employers to undergo automatic enrolment are above 95 per cent, above expectations.

Between April 2015 and March 2016 the regulator used its formal powers on 8,812 occasions – 6,643 more times than the previous year and an increase of 75 per cent.

Contributions continue to be in line with legislative requirements. Overall, the average employer contribution for staged employers was 3 per cent. This was slightly higher for stakeholder pensions at 4 per cent, while GPPs and Group Sipps saw 5 per cent employer contributions. Nest and other master trusts saw average employer contributions of 2 per cent.

The number of small and micro employers using or planning to use intermediaries continues to rise, with 68 and 64 per cent respectively planning to use a third party to help them with their duties. TPR’s research shows 31 per cent of small firms and 38 per cent of micros plan to use an accountant, while 20 per cent of small firms and 15 per cent of micros plan to use a financial adviser.

The majority of employers left to stage – 57 per cent – will be micro employers employing one to four people, of which 34 per cent employ just one person.

TPR has updated its forecast of the numbers of employers due to stage in the next two years. There is little change in the number of employers forecast to have workers that they will need to place into a pension scheme. This remains up to 950,000.

The number of employers using DC schemes for AE has risen from 86 per cent to 93 per cent. Of those who chose to put their staff into a DC trust scheme, 98 per cent chose a master trust, up from 94 per cent the previous year. Around half of workers who have been put into a pension have been automatically enrolled into a master trust. (3 million).

The report shows 97 per cent of workers put into a master trust are in one with master trust assurance.

TPR executive director for automatic enrolment says: “Our key challenge in the past year has been to engage hundreds of thousands of small and micro employers and to help them prepare for automatic enrolment.

“We needed to target these employers in new and innovative ways. The hard work and commitment of the many organisations who support employers – from trade bodies to employer representative bodies – has made a huge difference.

“The compliance rates achieved have been consistently at the top of our expectations and the savings landscape has been transformed. But we know the job is not yet done and there are still significant challenges ahead.”