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Employers hit with first penalties for auto-enrol non-compliance

The Pensions Regulator has issued its first three penalty notices to firms breaking auto-enrolment regulations following a huge jump in the number of times it had to use its powers.

TPR’s latest quarterly update on its investigations into auto-enrolment reveals it has served three firms with £400 fixed penalties for failing to comply with an unpaid contributions notice or a compliance notice.

The update shows there has been a surge in the number of compliance notices issued by the regulator over the last four months. TPR issued 163 notices between July and September 2014, compared to just 14 between the start of the auto-enrolment programme in October 2012 and July this year.

Last week, a survey of small and medium sized employers revealed the vast majority of SMEs yet to hit their staging date want a pause while the Budget pension reforms pass through parliament.

More than 33,000 large and medium employers have already begun auto-enrolling staff, with a further 1.25 million due to hit their staging dates over the next three years.

TPR executive director for automatic enrolment Charles Counsell says: “As we deal with smaller employers, we will see more who, despite our message to prepare early, leave it too late or do not comply at all. This type of non-compliance is not acceptable. We expect to see the number of times we need to use our powers increase.

“The regulator has a range of powers to tackle non-compliance including serving fixed penalty notices and escalating daily penalties notices.”


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There are 20 comments at the moment, we would love to hear your opinion too.

  1. “The regulator has a range of powers to tackle non-compliance including serving fixed penalty notices and escalating daily penalties notices.”

    Genius. So you fine these small firms and put them out of business as a result. Not only do the staff not have a pension – they don’t have a job.

    What great thinking

  2. Very true Harry but just wait a few years when the micro employer market is due to stage. It will go boogaloo. TPR will need more staff than the FCA to cope with dealing with non-compliance. The number of small business who go under will be rise exponentially.

  3. If £400 puts them out of business Harry then they probably weren’t going to last long anyway. We have to hope that TPR uses discretion in its fines and takes into account the financial position of a business but there must be a penalty for non-compliance otherwise what’s the incentive to do it.

    Last time that happened we ended up with stakeholder where many companies never even put a shell scheme in place because they knew nobody would take any notice even though there was a fine system in place.

  4. So Harry which employers would you select to comply with the rules and which ones to allow to ignore them?

  5. Three fines of £400. Well, that’ll scare all the little employers to death, won’t it? And do WONDERS for the rush to comply! Thank you, Regulator – well done.

  6. @Marty @ George Farnan

    The staging dates for the tiddlers starts next June! I already have 3 scenarios. The largest firm I advise has 12 employees, another has two one has three.

    1. All will opt out as this firm already pays in to individual PPs (in excess of current requirements) but it is done on a single premium basis – not recognised by the TPR. We have worked out a way of submitting rolling opt outs as required by the rules.

    2. The guy with three employees will make them self-employed. Possible in his line of work. So QED.

    3. The smallest – the owner is currently over 65 and has said “Stuff it – I’ll just close down – can’t be bothered with this cr-p”

    I wonder what other scenarios there may be and how many times the above three will be repeated and how many will just keep their heads down and ignore the whole thing?

    To George – quite simple any firm with less than 25 employees and a turnover of under £500k or a profit before tax, but after expenses not exceeding £200k should automatically be exempt. Alternatively any firm that can show they have pensions (any type) in place at the current funding rate as a minimum – whether or not they pay by single premium and whether or not the firm contributes directly (NB salary sacrifice) should also be exempt. The jobsworths bureaucrats just don’t understand what running a small firm entails. Why should these enterprises do the Governments work for them?

  7. Rt Hon Sir Arthur Streeb-Greebling 29th October 2014 at 4:42 am

    And, what, exactly happens if ( as with my ‘speeding’ fines) I advise my clients not to pay? And simply tell them to stack the outrageous demand for refusing to sell their employees a Mickey Mouse ‘pension’ ( that will be means tested away in the end anyway) over there in the corbner with the other totally unenforceable crap. You adiser lot should man up! Clients want guidance from you. That is what you are there for.

  8. Christopher Petrie 29th October 2014 at 7:17 am

    Employees are entitled to a pension scheme, giving them security in old age.

    It’s a basic premise of a decent society. There can be no excuse for Employers who don’t conform. The starting levels are very small as well.

    Greedy and/or inept SMEs cannot wriggle out of helping their staff (who earn the SME money remember) to build up some pension provision of their own. If it takes fines for them to learn that, then so be it.

  9. @Christopher Petrie

    Oh please! Are you some kind of socialist? What you have described is the duty of the State and the individual, who should be encouraged by the State (probably via the tax system) to do as much as they can for themselves. Companies are not benefit agencies. Their responsibility to their employees is to pay decent wages and provide a decent working environment. They are there to make a profit, help the economy, improve GDP and to concentrate on their day job – the are not an ex-officio arm of the welfare state.

  10. I spoke to a small business owner this week who employs 40 staff in an engineering business. Due to expansion costs and having to buy in new plant last year his profit margin was just 3% of turnover. Coincidentally – that’s the same percentage that he will have to pay into a workplace pension by October 2018. Paying away 3% of payroll will probably reduce his margin to around 2%. All it will take is a small increase in his costs and he is suddenly making a loss. What price a workplace pension if 20 of those 40 staff have to be laid off in order to reduce costs? My client is a very shrewd business man, and it probably won’t come to that, but the heavy handed bully boy tactics adopted by the Pensions Regulator on behalf of the Government will undoubtedly lead to companies going out of business and an increase in people claiming unemployment benefits. And exactly how will workplace pensions take the burden off the state pension when that buffoon of a pensions minister is telling people they can buy a Lamborghini with their pension funds when they get to retirement? Like most Government legislation, this has not been fully thought through, and it has been put into effect with little understanding of the impact on the small to medium sized employer.

  11. Whilst I am a bit of a socialist, Harry thinks I am a social worker and my children think K am a fascist, I actually agree with him that their should be a floor level for employee numbers and 25whilst an arbiter figure could be a good one. It would require an increase in min wage for those with employers under the 25 figure to be fair, but would be massively simpler than having to auto enrol and maintain staff like this for small employers.

  12. @Harry et al.
    The reality is that employers will adapt and the market will operate as they always do and it always does. Most emploers will continue to run their business because it feeds them and their families. However, there will be consequences and employees may not get such big pay rises and/or taking on a new employee may be delayed or not happen at all. There may even be redundancies. The extra money does not just magic itself up so generally there has to be a re-arrangement. Anyone who has been involved in running a business will recognise this. I suspect not all commentators have had that luxury…

  13. Christopher Petrie 29th October 2014 at 10:12 am

    A socialist would say the state should provide all pensions.

    In a capitalist world it’s not unreasonable for an Employer to make a contribution to his Employees pension fund.

    The money is earmarked for its owner and not just fed into a state-run ponzi scheme.

    Some Employers are bad employers. They need to be kicked into the modern world.

  14. 98% of firms employ less than 10 people so from the above comments are we suggesting that 98% of firms shouldn’t have to set up an occupational pension scheme for their employees?

    If we don’t base it on employee numbers and instead base it on turnover, where do we draw the line? What would happen if a bumper year pushed turnover above the threshold 1 year and a recession dipped it below the next? Would we have employers making contributions every so often?

    The bottom line is that pension provisions have been optional for years and people haven’t bothered. The government can not afford to fund the growing state pension bill and Joe Public isn’t helping itself, cue mandatory savings. Autoenrolment isn’t perfect but i do believe that it is a step in the right direction. To satisfy the likes of Harry maybe having a workplace pension scheme should be mandatory but employer contributions optional.

    No matter how much we argue about the merits of Autoenrolment we all agree that more retirement provisions need to be in place. Now that retirement can last 20 years plus people need to take more responsibility for their future.

    All the above are my own ramblings.

  15. @ Grey Area

    Can’t argue with that.

  16. We live in a democracy. WE, the people, elect members of parliament who make the rules. We may disagree with the rules and think they are wrong but in a democratic society we have signed up to obey the rules for the common good. Like several commentators, I think auto enrolment is far too prescriptive and may well harm employers and employees in some circumstances. BUT an employer cannot just opt out of the system because it does not suit them or even if they cannot afford it.
    If we the people want to change the rules that are made there is a process for that. It may not be a good one either but that is how it works.
    This is our social contract with the state.

  17. @George Farnan
    The majority of the population have no contract with the State as they don’t vote – not necessarily from apathy, but because the choice isn’t worth the candle. Your much vaunted democracy is a system that by definition panders to the lowest common denominator.
    Don’t ask me what is better – I have no idea, but democracy in the UK is a very long way from perfect.

  18. Contractually anon 29th October 2014 at 12:53 pm

    AE is a long game… the benefits are not going to be apparent for those nearing retirement, but for much younger workers, especially when the limits increase. It’s great to see that the opt out rates for younger workers are so low. I would have preferred education as the route to building a savings culture, but despite all the AE failings, it’s more good than it is bad.

  19. “Democracy is the worst form of government except all the others”
    Winston Churchill

  20. Those who say employers below a certain Turnover or Number of Staff should be exempt would simply construct a world where many businesses would refuse to reach these arbitrary figures simply due to the costs once they did. This can be seen both in the USA with Obamacare and in France where businesses which would need to fund significant social costs above a certain number of employees simply ensure that they never reach the required figure. The market always distorts when those making the rules make distortion a sensible business choice.

    Employers and employees need to pay to pensions for employees as the alternative is that those who are unable to or haven’t bothered to save end up with retirement income funded by Companies and Individuals through general taxation. In this event the cost cannot be easily quantified, will be loaded with the costs of collection and distribution (and bearing in mind the efficiency of the public sector this will be significant). More importantly those funded this way feel little connection to the income they receive and have a limited sense of anything other than an entitlement culture. Making those who will live in retirement on a pension make at least some contribution allows at least some pain to be shared and an appreciation of the true costs of retirement funding.

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