United Kingdom

Small employers are failing to comply with auto enrolment, whilst the DWP’s Workie is met with industry criticism

November 2015

 

Increasing numbers of employees are concerned that their employers are failing to comply with auto-enrolment legislation, a new study suggests.

Recent whistleblowing statistics released by the Pensions Regulator (tPR) and latest analysis by law firm Clyde & Co shows a 33 per cent increase to nearly 2,000 complaints to the regulator by March 2015. The law firm also found that enforcement activity has been increased, prompting them to release a warning to businesses due to stage imminently.

To date, the Regulator has issued 3,044 enforcement actions, of which more than 20% were issued in the quarter to September 2015 alone. Overall, this has included 18 inspections, 2,248 compliance notices (an increase of more than 25% in the last quarter alone), 145 Unpaid Contribution Notices (which more than doubled in the last quarter), 582 fixed £400 fines (again, up more than 20% in the last quarter) and 7 incidents of escalating penalties (ie daily fines). There is clear evidence that enforcement actions are increasing significantly as time goes on.

Businesses employing 30 employees or less are set to stage within the next 16 months whilst every UK business must have fully auto-enrolled their staff by April 2017.

People Management magazine warns that with the introduction of the new National Living Wage too, SMEs are likely to be experiencing additional pressure, not least because their staff pension contributions will need to be increased to meet the new requirements.

But according to Clare Abrahams, Head of Auto Enrolment at Aon Employee Benefits, the increase in fines are ‘inevitable’, particularly as large numbers of small employers are due to reach their staging date during 2016.

“The Regulator simply does not have the resource and capacity to talk to every one of them individually in order to understand why they might not have achieved compliance,” she said.

“The penalty and enforcement process will continue to become more automated as a result and we will see more and more automatic fines and daily fines emerge as has been evidenced in the quarter to September 2015. Unfortunately, many smaller employers are still not taking the right steps to get compliant. Due to the numbers there are going to be problems getting the right solution.”

However, Aon’s Littleblue 2go solution encourages employers to plan early for compliance and guides them through the entire process with Aon’s planner tool.

“Employers need to understand that compliance starts well before their Staging Date. This also has the added benefit of avoiding market saturation in the pension provider market in 2016 since we can guarantee them the pension scheme availability by booking their slot now and the provider can resource appropriately in advance. If they leave it too late, the cost of compliance is very likely to rise.” Abrahams added.

Meanwhile, a new government campaign, headed up by Pensions Minister Ros Altmann at the Department of Work and Pensions, has been launched to raise awareness of auto-enrolment among SMEs. The campaign, which features a larger-than-life furry monster called ‘Workie’ has been met with much criticism, especially in the press: Reward described it as out-of-touch, expensive and an all round bad idea, BT.com ran a piece on similar mascot fails and Money Marketing asked if Workie is a colossal waste of money. The Mirror and The Guardian have also been scathing.

But according to the Department of Work and Pensions, Workie is a ‘striking physical embodiment of the workplace pension’ with a simple message: Don’t Ignore it.

Pensions Minister Ros Altmann said: “This is a fun and quirky campaign but behind it lies a very serious message. We need everyone to know they are entitled to a workplace pension – and we need all employers to understand their legal responsibility to their staff, but also to feel more positive about engaging with workplace pensions.”

But for Abrahams, who applauds the DWP in raising awareness of a very serious issue and perhaps by making the campaign ‘purposefully controversial’ to encourage discussion and engagement, there remains some concerning issues:

“I cannot fault the reasoning behind Workie, but I think it is absolutely crazy to spend the money on a campaign asking people to search the term ‘Workplace Pension’ on the internet, without ensuring the information you want them to find is at the top of all the obvious search engines and before all the companies trying to sell consultancy solutions which the DWP would not want to endorse! Bing is a great example of where this fails currently, yet it is the default search engine in many offices.”

She added: “I also don’t understand why the campaign makes no reference to the term automatic enrolment or even the “We’re all in” campaign. Just at a time when employers were starting to understand what all the talk about auto-enrolment and those previous adverts were about, in comes a whole new campaign and terminology which people may not associate with it. It just seems too much like they have started from scratch instead of building on the momentum that was already there.”

 

 

Aon UK Limited is authorised and regulated by the Financial Conduct Authority. Registered in England and Wales. Registered number: 00210725. Registered Office: The Aon Centre, The Leadenhall Building, 122 Leadenhall Street, London EC3V 4AN.