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Keeping the finger on the automatic enrolment pulse

22 December 2017

Just because you are paranoid does not mean they are not out to get you!

Especially when it comes to carrying out obligations under the government’s pension automatic enrolment regime. Receiving an unwanted knock at the door is now a realistic possibility for any business.

Inspection teams from The Pensions Regulator (TPR) have been carrying out increasing numbers of spot checks to ensure that employers are performing their automatic enrolment duties correctly. The move is part of a nationwide enforcement campaign, which began in London before spreading to Manchester and Birmingham.

Darren Ryder, acting director of automatic enrolment at TPR, said “Every employer has workplace pension duties and we are determined that every worker gets the pension they are entitled to. Automatic enrolment is not an option, it’s the law. Where we find employers are not complying with the law, we will use our powers to make them comply."

To date the numbers of firms that have been failing to comply has been alarmingly high. By September 2017 TPR had issued 62,462 compliance notices, with 13,752 having been issued in the most recent quarter alone.

Furthermore, the significance of receiving such a notice has escalated dramatically. Initially non-compliance tended to amount to little more than a theoretical rap on the knuckles but now it can involve steep fines or even prosecutions.

The key message for employers to take on board is that, whilst the world we live in has tended to be reactionary in the past, from now onwards it’s essential to be more proactive. If a business hasn’t had a serious look at its automatic enrolment procedures since its staging date then how on earth can it expect to know what’s going on or what has been missed?

It is essential to ensure that record keeping is compliant on an ongoing basis but many businesses are failing to do this. They may have had help from an accountant or payroll provider at outset but have subsequently been doing things themselves for the last two or three years and allowed standards to drop.

It can be all too easy to forget about doing those TPR declarations at re-enrolment or, with particular relevance to a critical milestone looming in April 2018, to overlook communicating with the workforce about the impending phasing up of pension contributions.

To date automatic enrolment has required a total minimum contribution of only 2%, with the employer contributing at least 1%. But with effect from April 6th 2018 the total minimum contribution becomes 5%, of which the employer must contribute at least 2%. A year later the rates rise once again to 8% and 3% respectively. 

Although some employees may vaguely recall hearing about the impending rises when they originally auto-enrolled, for many the news is likely to come like a most unwanted bolt out of the blue. So an effective communications programme to assist with expectation management should be a key priority. 

Chase de Vere, which can provide a range of financial education seminars and workshops as well as one-to-one face-to-face advice, is well placed to help in this respect. We can also advise on what level of employer contributions firms should be making.

It has long been predicted that employee drop-out rates will rise significantly once the automatic enrolment contribution rates start increasing from what has been a fairly innocuous initial requirement. But one obvious way of boosting the chances of employees staying in the scheme is to offer a higher employer contribution than the soon-to-be mandatory 2%.

The accompanying goodwill that this could generate from employees when they realise that their employer is prepared to go the extra mile for them should also not be underestimated.

Using the services of a specialist adviser on a fee-paying basis can help avoid a whole range of pitfalls and, by enhancing engagement via effective communication, can turn what may seem like an unwanted mesh of compliance into an extremely positive development for your business.

If you would like to find out more about how Chase de Vere can help you comply with automatic enrolment requirements and maximise the opportunities that the regime presents then please do not hesitate to contacton 0345 300 6256 or complete this simple form and we’ll call you.