Oct 14
Auto Enrolment Lessons to be Learned Recently The Pensions Regulator (TPR) has issued their latest research and analysis report into auto enrolment. This has given us some clues to what the next two to three years will bring for employers yet to start their auto enrolment duties.
them much. But all the indications are that opt-out rates are much lower than expected. According to DWP research, opt-out rates ranged between 5% and 15%. As a result, it's changed its assumption for the opt-out rate amongst all employers, - including small and micro employers from 30% to 15%.
The report mainly covers large and medium size employers. However there are lessons to be learned for the estimated 1.3 million smaller employers due to stage between now and 2018.
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 auto enrolment as well. Of course employers might not have any eligible jobholders at all but more people could opt-in than predicted, so employers should be careful in their assumptions.
The use of postponement
Compliance and enforcement
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 while complying with their duties. Therefore employers should become familiar with exactly what postponement is and how to use it.
TPR says that 99% of employers have achieved compliance without intervention. However, there have been several cases they have investigated and used their powers. From 1 April 2013 to 31 March 2014, TPR issued 14 compliance notices, one unpaid contributions notice, two statutory inspection notices and one Statutory Demand.
Opt-out rates Some employers might think that most or all of their workers will opt-out and so auto enrolment won't cost
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 auto enrolment project. A Statutory Demand notice can be issued by TPR where it wants to see any documentation relating to the pension scheme. All of these powers are backed up by the force of the law, and employers who fail to comply can subsequently face criminal charges. TPR identify some common themes that led them to using their formal powers: Organisational restructures due to mergers/wind-ups Multiple employers within the same organisation not completing a declaration of compliance Not planning early enough Dealing with smaller employers As yet TPR has not actually fined any employer for a breach of the Pensions Act 2008. They are concentrating their resources on helping and guiding employers to comply with their duties. However, it's only a matter of time before fines will be issued. In fact TPR already anticipate that they will have to use their formal powers more - in particular where they identify wilful non-compliance (wilful noncompliance has a maximum penalty of 5 years in prison).
So over the next 12 months, part of TPR's focus is to educate employers and raise awareness of auto enrolment as well as reaching out to the professionals that will help employers to get compliant. But somewhat ironically, it may only be when the first employer is fined that we'll start to see many employers sit up and take notice.
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Contact us If you wish to discuss the content of this brief in more detail please contact Tony Smith directly on 02920 853 764 or e‐mail tony.smith@thomas-carroll.co.uk This information is based on our current understanding of UK law and HM Revenue & Customs practise and legislation we believe may apply in the future. No guarantees are given regarding the effectiveness of any arrangements entered into on the basis of these comments. 1 Awarded by the PFS in 2009 2 Awarded by Bankhall Group in 2014 3 Awarded by Bankhall Group in 2012 and 2014 4 Awarded by Bankhall Group in 2010 and 2011