We spoke to Charles Counsell, The Pensions Regulator’s executive director of automatic enrolment about auto enrolment (AE) policies as well as priorities and pitfalls for small businesses.
1. With AE now in full swing, is TPR happy with how the rollout has gone?
Yes. This summer we announced 200,000 employers had met their workplace pensions duties and over 6.5 million staff are now saving for their retirement thanks to automatic enrolment.
This milestone shows the successful roll out of automatic enrolment so far. It has brought real change to the savings landscape, however we know there are challenges ahead as over a million more employers meet their duties.
2. Is TPR concerned about the increase in penalties for non-compliance and infractions?
We have always expected that as the number of employers grows and the type of employer changes, we would see an increase in the use of our powers.
Small employers often behave more like individuals – while many will get on with what they need to do, other may leave things to the last minute.
The vast majority of employers comply with their duties on time, but a small number need the extra nudge of a compliance notice. In most cases this is enough to get them back on track and avoid financial penalty.
Compliance notices often have to be issued because an employer has failed to plan early enough. Employers should start planning 12 months before their staging date – the date on which their legal duties start. Employers who are concerned they will not be able to comply on time should contact TPR.
3. What exactly is TPR's role in regards to AE? Does TPR set policy?
TPR is tasked with maximising employers’ compliance with their workplace pensions duties.
Our approach is to educate and enable employers so that they have the information and tools they need to comply with the law.
We alert employers through our TV, radio and online advertising and we write directly to them telling them what they need to do and by when.
Our online guides and tools make automatic enrolment as straight forward as possible. We also work with employer and professional bodies so that they are equipped to help their clients and members with their duties.
We encourage all employers to come to our ‘duties checker’ to find out what duties apply to them. This takes no more than 5 minutes.
We do not set policy, that is a matter for central government but we do have a statutory objective to ensure employers comply with their duties so that staff receive the pensions they are entitled to.
This means we will use our enforcement powers where appropriate, including issuing financial penalties.
4. What’s TPR’s main priority as automatic enrolment continues?
We want see the continued successful roll out of automatic enrolment. With more than a million small and micro employers still to meet their duties, we want them to be clear about what they need to do and act in good time.
Many of these employers will not have pensions experience and will be from all sorts of employment sectors.
We always keep our communications under review so that they are suitable for changing audiences.
Whether you own a grocer shop, run a pub or a firm of architects, whether you have just one employee in the home or lots of seasonal staff, we want to ensure you have the information you need in a way that is accessible to you.
5. What are common pitfalls and what can employers do to avoid the risk of being fined ?
We publish regular bulletins which show where we have used our powers and highlight lessons learned from employers who had become non compliant so that others can avoid the same mistakes.
Our most recent bulletin published this summer gave the example of an employer who had become non compliant because they had wrongly assumed their business adviser was completing their duties for them.
Responsibility for meeting automatic enrolment lies with the employer, however if you do use a business adviser, you should be clear who will be responsible for what task.
Another employer became unstuck because they had wrongly assumed that as their staff did not need to be put into a pension scheme, they did not have duties. If you are an employer, you will always have some automatic enrolment duties.
You will need to write to staff to tell them how auto enrolment effects them and you will need to complete a declaration of compliance.
The declaration tells TPR what the employer has done to meet their duties. It is legal duty and must be completed accurately and submitted within five months of the staging date.
6. How long does it take to implement automatic enrolment and how much does it cost ?
The time and cost of automatic enrolment will vary from employer to employer, however TPR research of employers with between one and four staff showed that 60% of them had no set up costs. Those that used a business adviser paid around £400.
Set up costs will depend on various factors, including whether and how an employer uses a business adviser, how they run their payroll and which pension scheme they choose.
Costs will also vary if an employer has more staff as some providers or business advisers may charge based on the number of staff. Costs may also vary in different regions.
There is a risk of paying more if you leave your plans to the last minute and employers should leave themselves plenty of time to shop around for providers and services.
The employers we spoke to who had between one and four staff spent around a total of 10 hours overall, over the 12 month period before their staging date, carrying out all their automatic enrolment tasks.
Employers also found that taking the time to read the step by step guide at the start saved them time over all. More information on understanding your costs can be found here.