Pensions have been in the news again this week, following the replacement of the UK’s longest serving Pensions Minister, Steve Webb, with the equally respected pensions campaigner and industry expert, Ros Altmann. Altmann’s appointment has been welcomed by the industry, and she has already made some encouraging remarks about carrying on Webb’s good work in ensuring that there are good quality workplace pension schemes available throughout the UK.

The impact of the General Election, however, has not affected the work of The Pensions Regulator, which has been continuing to step up its enforcement activities in relation to the auto-enrolment regime. Its efforts have been highlighted in the most recent quarterly Compliance and Enforcement bulletin – and some of the statistics included in it have raised a few eyebrows in the pensions industry.

For the first time, the Regulator has used its powers to issue Escalating Penalty Notices. These are issued in the event that an employer has failed to comply with statutory notices already served on it, being either a Compliance Notice, a Third Party Compliance Notice, an Information Notice or an Unpaid Contributions Notice. Escalating Penalty Notices carry a daily fine of between £50 and £10,000, depending on the size of the employer in question.

Four such notices were issued in the period covering 1 January to 31 March 2015. At present, no further information has been released by the Regulator on the size of the fines imposed or indeed the nature of the offences, i.e. were these cases of wilful non-compliance by the employers, or were they perhaps instances of the employers trying but, in reality, struggling to meet the legislative requirements, even having received initial assistance from the Regulator?

One thing is for certain: this trend of heightening enforcement activity is only going to continue, particularly with 1.2 million SMEs due to automatically enrol over the next three years.

Further evidence of the Regulator’s increasing activity can be seen in the number of Information Notices issued (this has nearly doubled to 31), and the number of Unpaid Contribution Notices and Fixed Penalty Notices issued (each of these figures has more than doubled, to 9 and 198 respectively).

In more positive news, new regulations came into force in early April which are designed to ease the administrative burden on employers. The regulations:

  • reduce the extent of the information required to be given to workers
  • give employers the option of whether or not to automatically enrol (or re-enrol) workers who:
    • contractually joined a qualifying pension scheme and then ceased membership of that scheme, or who have previously been automatically enrolled into a qualifying pension scheme and opted out or ceased membership of that scheme
    • had ceased membership up to 12 months before the automatic enrolment date or automatic re-enrolment date
  • give employers the option of whether to auto-enrol workers or jobholders who have handed in their notice
  • allow employers to decline to auto-enrol workers whom they suspect have one of the prescribed types of annual allowance-related tax protection
  • introduce a new alternative quality requirement for defined benefit schemes which employers wish to use to comply with their auto-enrolment obligations

While we wait with interest to see whether there will be further changes to the auto-enrolment regime (among other things) proposed by the new Pensions Minister, employers do need to give themselves plenty of time to plan how they will implement and ensure that their workplace pension scheme will meet the regulatory and good quality standards currently in place.

© MacRoberts 2015