Auto enrolment, the ticking time bomb
With the initial commencement of auto enrolment now being over three and a half years ago the expectation is that all relevant parties should now be aware of their obligations. However, this is often not the case.
To be clear, all employers, whether they employ a workforce of 1,000 or just 1, have an obligation to automatically enrol their staff into a qualifying workplace pension scheme. Failure to do so will result in the employer receiving penalty notices, fines and possible court action from The Pensions Regulator. Assuming that existing pension arrangements comply with the regulations or that employees do not wish to take part are not justifiable defences.
Penalties are already being issued and are calculated on a daily basis at a rate determined by the total number of employees. For example those with 5-49 employees can expect rate of £500 a day whilst for those with 1-4 the daily rate is £50.
The setting of each employer’s ‘staging date’ (the date by which they have to commence automatically enrolling employees into a qualifying scheme) was originally determined by the number of employees, with the largest employers first. We are now entering a period during which smaller employers are reaching their staging dates. Considering the numbers of small employers in the UK, pension providers are bracing themselves for a significant increase in the number of schemes that will need to be established over the coming months. They are therefore warning that coping with late applications will be challenging.
With this in mind, it is imperative that plans are put in place as early as possible to ensure compliance. In addition, the earlier that plans are put in place the less likely any problems may materialise.
For more information about auto enrolment, please contact me or your usual contact at Mercer & Hole.
Date: 17th February, 2016
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