Prepare in time for smooth auto-enrolment

So far more than seven million people have been put into a pension by their employer because of automatic enrolment, according to TPR.

By mid 2017, 10 million workers will have been enrolled.

To date 340,000 employers are on board.

Opt out rates are running at 17 per cent, but that is less than expected. However, there is a downside. Recent figures from YouGov revealed that over half of small and micro businesses saw auto-enrolment as a burden, whilst around 40 per cent of them described it as ‘unfair’.

The number of fixed penalty notices given out between July and September, where employers are fined £400, increased to 3,728, more than four times the previous quarter. TPR issued 576 escalating penalty notices to employers, more than 15 times the amount in the previous three months. Employers that receive such a notice receive a penalty of between £50 and £10,000 per day, depending on their size.

To date TPR has used its powers to issue 26,040 compliance notices, 6,779 fixed penalty notices and 741 escalating penalty notices.

It has always been expected that the figures would rise, but no one truly knows how many recalcitrant businesses there are likely to be.

There has been a massive amount of publicity and TPR has looked to encourage and educate.

But they are determined to enforce compliance.

Any small firm thinking they can wheedle out of it is in line for a rude shock. And late compliance will lead to back payments so that employees don’t miss out.

Explanations given for non-compliance such as illness, being short-staffed, or confusion between employers and their advisers, are deemed not a ‘reasonable excuse’.

Charles Counsell, executive director of automatic enrolment at TPR, said: “We recognise that employers have unique circumstances and challenges, but the law is still the law. The vast majority of employers are successfully meeting their automatic enrolment duties and are doing the right thing for their staff. Employers who are struggling should contact us – do not wait for a fine.” And it doesn’t end there. April 2018 sees statutory minimum contributions increasing – from two per cent overall (employer one per cent and employee one per cent) to five per cent overall (employer two per cent and employee three per cent). In April 2019, statutory minimum contributions increase again to eight per cent overall (employer three per cent and employee five per cent).

So here are three tips to keep employers on top of their auto enrolment responsibilities:

Allow enough time to select your pension scheme, start to prepare for auto-enrolment at least 12 months in advance of your staging date, and give yourself time to choose the right pension provider.

Take advantage of TPR’s Duties Checker system so you are aware of exactly what is required to comply.

If you are using an adviser you both need be clear about who is completing each auto-enrolment task and by when.

Don’t be dragged kicking and screaming into auto enrolment. We can help you. So, pick up the phone. Trevor Law is managing director of Merito Financial Services, chartered financial planners, based in Solihull. Email:tilaw@meritofs.com