Pensions Watchdog Takes Increasingly Tough Line on Auto-Enrolment

A study based on figures obtained from the Pensions Regulator indicates that the number of fines and other enforcement actions imposed on companies that failed to comply with pensions auto-enrolment regulations quadrupled last year after an increase in the number of tip-offs to regulators by whistleblowers. The Pensions Regulator used 8,800 enforcement actions against firms in the year to the end of March compared with 1,947 in the preceding year, and the number of reports made to the regulator by whistleblowers increased by 29% to 2,545 from 1,968.

Football club concedes penalty on pensions

Swindon Town Football Club hit the headlines in April after being fined £22,900 for “repeatedly” failing to meet government pension auto-enrolment rules.

The Pensions Regulator said the club had not put eligible employees into the government’s workplace pension scheme, despite being warned in August 2014.

The club failed to auto-enrol eligible workers into a pension scheme in time for its auto-enrolment staging date, neglected to pay employees’ pension contributions, and did not write to staff explaining how auto-enrolment affected them.

Charles Counsell, the watchdog’s executive director of automatic enrolment, said:

“This case illustrates what can happen when an employer buries their head in the sand and disregards their duties . . . They had plenty of time to do it and we were in communication with them a lot in the period until that point [in August 2014].”

Mr Counsell added: “We’re very keen employers get this done so that employees get the pension that they’re due . . . “If things aren’t going well, then talk to us; don’t ignore us.”

Swindon Town said it is now compliant with the pension rules, although it will still need to pay off the fine and make back-dated pension contributions.

More ‘escalating’ fines can be expected

Swindon Town’s fine was calculated at a rate of £2,500 per day for the period its compliance was deemed unsatisfactory by the regulator, and also included a lump sum fine.

This is the first time the Pensions Regulator has issued an ‘escalating’ penalty of such a size to an employer for non-compliance. Such escalating penalty notices are issued when firms fail to meet a 28-day warning notice from the regulator. The regulator issued 96 escalating penalty notices against employers in the first quarter of 2016, the most it has issued over any quarter, bringing the total to 127.

Debi O’Donovan, founder of the Reward & Employee Benefits Association, said that although the Pensions Regulator is attempting to work with employers that are struggling with auto-enrolment, more cases are almost certain.

“So far, just 4% of employers have staged pensions auto-enrolment, with all of the small SMEs and micro employers still to fall under the rules. You can’t help but expect more to – unwisely – ignore their obligations in the next few years.”

What employers need to know about auto-enrolment

Under legislation introduced in 2012, all employers must eventually offer a workplace pension scheme and automatically enrol eligible workers in it.

Larger employers have been required to apply the law since October 2012, and now smaller firms will have to meet the same rules that will apply to all employers by 2018.

To avoid being fined, employers must make sure they start planning early, find out their staging date and understand what and when they need to do to comply with their automatic enrolment duties.

Charles Counsell says: “It’s simply not fair for staff not to receive the pension contributions they are legally due. But failing to act also means an employer risks clocking up a significant penalty until they put things right.”

Employment law experts

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